US doubts spoil Far East party

MARKETS in Asia were cheered by the easing of Middle East tension after Iraq's offer to allow weapons inspectors to return to Baghdad, but the joy was confined by Washington's sceptical response to the proposals.

Airline stocks were the biggest gainers as oil prices began to ease, and the threat of higher fuel costs receded. In after-hours trading in New York the price of crude oil fell by almost 5% after Iraq said the inspectors would be allowed back without conditions.

Regional markets were also lifted by rebuilding of US business inventories in July, which was seen as positive sign for the longterm recovery of Asia's biggest export market.

A strong performance by the US dollar boosted optimism in Japan, where a jump of more than 3% took the Nikkei to a two-week high close of 9543.94 points, up 302.01. This took the index away from levels at which the valuations of the investment shareholdings of big banks would endanger their capital ratios.

The greenback was trading at 122.82 yen in Tokyo, up from 122.30 overnight in New York, and has now risen 6% in a month, reducing the cost of Japan's exports. Shares in car makers and component suppliers soared an average of 5% in the wake of the yen's fall, while technology counters were also speeding ahead. Toyota, up 5.3%, and Sony, ahead by 6%, set the pace among the winners from the weaker yen.

Lower oil prices are also good news for Japan and other regional economies, but airlines were the biggest gainers on the overnight fall in price. Shares in Japan Airlines, the national carrier, climbed more than 2%, while smaller rival All-Nippon Airways added 3.6%. Singapore Airlines, the biggest Asian operator, was up 4%, while in Australia Qantas rose almost 2%. Korean Air accelerated more than 6%, while second-line carrier Asiana Airlines was up more than 4%.

In Hong Kong, the Hang Seng index was boosted 202.1 points to 9707.2 after Cathay Pacific shares lifted off by 4.5%. Locally-quoted mainland China carriers were up by more than 3%.

The market was also relieved by news of the sale of the final tranche of the Tracker Fund. This has been overhanging the market since it was set up to dispose of the huge portfolio of stocks bought by the government as part of an intervention programme to prop up the local currency in 1998.

Shares of South Korea's automakers followed airlines on lower oil pries, and the Kospi gained 18.25 points at 722.63. In Taiwan, the Weighted Average advanced 86.96 points to 4544.12, led by China Airlines, which added more than 3%.

The oil price fall was not good news for Australian resource stocks, and BHP Billiton and Woodside Petroleum both lost some of their recent gains but a good performance by News Corporation kept the All Ordinaries index ahead, with a rise of 81.4 points to 3156.7 at the close.

Singapore investors remained cautious, and despite the local airline's strong rise, the gain on the Straits Times index was limited to 12.7 points at 1455.3. Malaysia's Kuala Lumpur Composite index moved up 3.19 points to 687.48, while in Thailand the SET index surged 5.44 points to 357.32. In Indonesia the Jakarta Composite index gained 2.84 points at 423.05.

Prices and indices in this section are supplied from various sources and calculated at different times and may not always match those listed on the site.