SHANGHAI, March 31 (Monday) -- Stock markets across Asia opened lower today as traders digested the prospect that the war in Iraq would likely drag on longer than expected, dampening demand for the region's products in the United States.
Investors also appeared to be retreating in the face of growing fears about the spread of a global mystery virus from its epicenter in southern China. Warnings about the disease from health authorities around the world have prompted travelers to cancel scheduled trips to the region, most notably the Rolling Stones, who had been scheduled to play two historic concerts in Shanghai and Beijing this week, but announced over the weekend that the dates would be postponed.
In trading early today, Japan's widely watched Nikkei 225 stock index was down 2.5 percent, while South Korea's Kospi index fell 2.8 percent. Traders said the market was reacting in part to a stock market drop in New York on Friday, but also to the televised spectacle of a war that looks nastier than once anticipated, with images of civilians killed in a Baghdad market, and United States and British soldiers bogged down in cities that will not be taken easily.
"People used to think the war would be over in three to four weeks," said Garry Evans, an analyst at HSBC Securities in Tokyo. "Now, the most optimistic people think it will go on for six weeks."
Still, the most fundamentally important economic trend for Asia continued to shape up favorably: The price of oil remained much lower than once feared. Many Asian countries, particularly Japan, are heavily dependent on imported oil. In the run-up to the war, regional stock markets dropped precipitously as the price of oil climbed. With the price of oil below the peak set in early March, traders have taken some reassurance. "The war has so far had a positive effect on Asia because of the oil price," said Andy Xie, an economist at Morgan Stanley in Hong Kong.
Of greater worry may be the war's effect on Asian exports, long the engine of regional growth. If U.S. consumers prove reluctant to spend as the war goes on, Asian exporters will feel the pain.
Special correspondent Akiko Kashiwagi in Tokyo contributed to this report.