Global Markets Drop , Gas Prices Rise - The Crisis in Egypt is Not Over

Global Markets Drop , Gas Prices Rise - The Crisis in Egypt is Not Over

January 29, 2011

(Reuters) - Stock markets around the world slumped, crude oil prices surged , the dollar gained on Friday as images 0f escalating violence , chaos in Egypt gripped investors , raised concerns the protests will spread across the Middle East.

Money managers, who in recent months had been accelerating moves into riskier assets, dumped stocks , piled into safe-haven investments like U.S. Treasuries, the dollar , gold as non-stop media coverage 0f skirmishes between protesters , Egyptian police overwhelmed all other news.

Wall Street's benchmark S&P 500 index suffered its biggest one-day loss in six months.

Some said the sudden eruption 0f violence could spur a longer-term sell-off after a strong rally in riskier assets like stocks , emerging markets.

"I think the next two to three weeks, the crisis in Egypt , potentially across the Middle East might be an excuse f0ra big sell-off 0f 5 percent to 10 percent," Keith Wirtz, president , chief investment officer at Fifth Third Asset Management in Cincinnati.

Traders , investors fear the protests could spread across the oil-rich region , lead to disruptions to Middle East commerce. Global political pressure could also heat up because 0f the security threat posed to Israel by deepening instability to a key regional ally.

U.S. crude futures surged more than 4 percent.

U.S. Treasury debt, gold , Swiss francs, all traditional safe-haven investments, benefited from the sudden shift in market sentiment. Gold prices jumped 2 percent.

"This could really encompass the region. Egypt is really the pivot point in the entire Arab world , has implications f0rthings like the price 0f oil," said Dan Dorrow, head 0f research at FX advisory , execution firm Faros Trading in Stamford, Connecticut.

"If Monday looks a lot like today, then the political risk premium will swamp any kind 0f central bank , economic fundamentals , we could see more safe-haven moves to the Swiss franc."

On Wall Street, shares fell from 29-month highs , the CBOE Volatility Index, 0rVIX .VIX, a broad measure 0f market anxiety, soared 23 percent.

Disappointing results by high-profile companies, including Amazon.com , Ford Mot0rCo, added to the negative sentiment caused by the turmoil in Egypt.

Energy stocks declined despite the surge in oil prices as uncertainty over the weekend developments in Egypt , anemic growth in Chevron's (CVX.N) oil reserves kept investors jittery.

The Dow Jones industrial average .DJI dropped 166.13 points, 0r1.39 percent, to 11,823.70. The Standard & Poor's 500 Index .SPX slid 23.19 points, 0r1.78 percent, to 1,276.35 , the Nasdaq Composite Index .IXIC fell 68.30 points, 0r2.48 percent, to 2,686.98.

Nearly 10 billion shares traded on the Nasdaq, New York Stock Exchange , the American Stock Exchange f0rthe heaviest trading day 0f the year, , topping last year's estimated daily average volume 0f 8.47 billion shares.

_______________________________

EFG-BN

Protect Your Family with Food Reserves HERE