Wall Street Shares Fall Sharply Amid Libyan Unrest
Wall Street Shares Fall Sharply Amid Libyan Unrest – Political turmoil in the Middle East and North Africa continued to haunt financial markets on Tuesday, pushing up crude oil, driving down stock prices and sending investors into safe-haven investments. The unrest seen during the overthrow of the leaders of Egypt and Tunisia has swept into Bahrain, Algeria and Libya. There have also been demonstrations in Yemen, Jordan, Syria and Lebanon.
“Over the past few weeks we had a domino effect, and the concern is that anything can happen,” said Justin Urquhart Stewart, a founder of Seven Investment Management in London. “At the moment the ripple is very small, but it has the potential to turn into something bigger quickly.” Much of the uncertainty is being stoked by fears over oil supplies. Analysts have been keeping an eye on Libya, which has the largest oil reserves in Africa, and on Bahrain, which is next to Saudi Arabia.
“Geopolitical ripples in the Middle East are the basis for today’s decline,” said Lawrence R. Creatura, a portfolio manager at Federated Investors. “Higher energy prices act like a tax on consumers, reducing the amount of discretionary purchasing power that they have,” Mr. Creatura said. “It represents an additional, potential headwind for retailers.” Treasury prices rose and stocks declined in the United States, where the main Wall Street stock indexes have risen steadily in recent months to levels not seen since the financial crisis started.
In the final minutes of trading, the Dow Jones industrial average was down 204.43 points, or 1.64 percent. The broader Standard & Poor’s 500-stock index declined 30.09, or 2.24 percent, while the technology heavy Nasdaq lost 81.16 points, or 2.86 percent. Markets in Europe and Asia were also lower. In Europe, the FTSE-100 in London lost 0.3 percent while the CAC-40 in Paris declined by 1.1 percent. In Asia, the Nikkei 225 closed 1.8 percent lower on Tuesday, and the Hang Seng in Hong Kong sank 2.1 percent.
Financials, industrials and materials shares shed more than 2 percent in the broader market in New York trading. In addition to the turmoil in the Middle East, investors took in some discouraging developments in the United States economy. Shares of Wal-Mart, the world’s largest retailer, dropped 4 percent after the company said sales at stores open at least a year in the United States fell 1.8 percent in the fourth quarter. Real estate prices slid again in December, pushing a leading price index, the Standard & Poor’s/Case-Shiller Home Price Index of 20 large metropolitan areas, down 1 percent in December on an unadjusted basis.
Amid the uncertainty, bond prices rose. The yield on 10-year Treasury notes was 3.48 percent down from 3.58 percent late Friday. “You are getting a flight to quality bid,” said Laura LaRosa, the director of fixed income at Glenmede. “The equity market is feeling jittery with what is going on in the Middle East.” “The more volatile, the more I would think people would flock to Treasuries right now,” she said. “I would imagine if there is continued volatility you will continue to see that on a daily basis.” In Libya, Col. Muammar el-Qaddafi vowed on state television on Tuesday “to fight to the last drop of blood.” Human Rights Watch said it had confirmed at least 62 deaths in the violence in Tripoli so far, and more than 200 people killed in clashes elsewhere, mostly in the eastern city of Benghazi, where the uprising began last week. Opposition groups estimated that at least 500 people had been killed.
In an effort to calm turbulent oil markets, Saudi Arabia’s oil minister, Ali al-Naimi, said that the Organization of the Petroleum Exporting Countries was ready to meet any shortage in supply by the unrest. Light, sweet crude oil for April delivery surged in New York, rising $5.71, or 6.4 percent, to settle at $95.42 The April contract for Brent crude, a global benchmark for oil that trades in London, was up 1 percent at $106.72 a barrel, after hitting $108.57 earlier in the session. In addition, the Paris-based International Energy Agency tried to reassure the market that it “stands ready, as always, to make oil available to the market in the event of a major supply disruption if alternative supplies cannot readily be made available via normal market mechanisms.”
For the moment, it added in a statement, “we are not in a situation where that is necessary.” But some noted that it is the prospect, rather than the reality, of dislocations in supply that was currently spooking the markets. “Obviously as this situation in the Middle East continues to unravel it is about fear,” said Thomas Bentz, an energy analyst with BNP Paribas. “It is worry that we will continue to see this unrest spreading across other major oil producers. Prices react to the potential loss of supply; it doesn’t necessarily have to be that there is an actual loss of supply.”
Source: www.nytimes.com
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