NEW YORK, Jan 27: The much-anticipated report on Iraq’s arsenal by UN weapons inspectors did little on Monday to dispel the fear of war in world financial markets, which reacted by sending stocks sharply lower.

Major stock market indexes, US Treasuries and the dollar fell after Chief UN weapons inspector Hans Blix said Iraq had cooperated in opening sites for inspection but had fallen short in filling in the gaps in last month’s declaration of its weapons programmes.

“Iraq appears not to have come to genuine acceptance, not even today, of the disarmament that was demanded of it,” Blix told the UN Security Council.

“Clearly the Blix commentary doesn’t relieve any of the big-picture tension asset markets find themselves embroiled in,” said Andrew Delano, currency strategist at IDEAGlobal in New York.

Blix said that while Baghdad had provided inspectors with access to sites, it had failed to resolve major outstanding questions about its arms programmes, put conditions on guaranteeing the safety of overflights by U-2 spy planes and failed to account for supplies of anthrax it said it had made and later destroyed.

The Bush administration said the United States would regard any findings by UN inspectors of partial failures by Iraq to comply with arms inspections as a complete failure to meet UN disarmament demands.

Global stock markets slumped and the dollar fell as uncertainty over the threat of war rattled the world. Gold spiked to its highest level in more than six years with investors seeking refuge in save havens.

In midday trading the blue-chip Dow Jones Industrial average fell 116.83 points, or 1.44 per cent, at 8,014.18, after earlier dipping below the 8,000 level for the first time since Oct. 15. Only three of the 30 Dow components — phone company SBC Communications Inc. and retailer Wal-Mart Stores Inc. and chip maker Intel Corp. — ticked higher.

The broad Standard & Poor’s 500 index lost 11.46 points, or 1.33 per cent, at 849.94. The technology-loaded Nasdaq Composite Index dropped 14.38 points, or 1.07 per cent, to 1,327.76.

European shares tumbled to their lowest levels in almost six years as large investors dumped chunks of their equity holdings.

At 1715 GMT, with only Frankfurt still trading, the FTSE Eurotop 300 index was down 3.4 per cent at 771 points — its ninth successive fall to levels last seen in April 1997.

Only 12 of the 300 European companies listed in the Eurotop managed a gain.

The DJ Euro Stoxx 50 was down 3.7 per cent at 2,152.01, with decliners eclipsing advancers by 49 to one.

Asian shares also fell on Monday. Tokyo’s Nikkei closed down 1.4 per cent and the broader TOPIX index ended down 1.32 per cent.

The broad Morgan Stanley Asia Pacific Free Index closed down 1.18 per cent.

European insurers fared the worst on Monday, with the DJ Stoxx insurance sector index sinking 5.9 per cent to stand more than 70 per cent below its 2000 peak.—Reuters