Hopes on financial markets for a quick end to the war in Iraq faded today, sending investors back into safe-haven bonds and raising oil prices.
Dealers said they expected European bourses to open lower, although the Japanese market, which had been shut for a holiday on Friday, leapt 3 per cent to a three-week high.
The dollar slipped against major currencies and gold prices rose more than $3 an ounce at the European open.
Stocks rallied across the world last week, safe-haven instruments lost favour and oil prices plummeted as US-led forces appeared to be making progress in their desert campaign.
It was a continuation of trends that have been running since mid-March when the uncertainty of whether there would be a war began to lift.
After three days of unbroken successes and minimal setbacks, US and British troops endured their heaviest combat casualties yesterday in their war to overthrow President Saddam Hussein and disarm Iraq of its alleged weapons of mass destruction.
Today oil rose around 2 per cent from its four-month low as the war brought another night of bombing to Baghdad. US light crude oil was up 60 cents a barrel to $27.51 but remained far off recent 12-year highs near $40 after slumping as much as 30 percent last week.
Prices of US Treasuries were sharply higher and yields lower. The 10-year US Treasury note yields were down 8.2 basis points at 4.0251 per cent.
European shares were expected to open sharply lower.
Dealers said the FTSE 100 share index in London was expected to open down 30 to 50 points, with the German blue-chip DAX index seen off 50 to 70 points. The French CAC-40 index was expected to fall about 40 points at the opening.