While you were sleeping: Libya remains key concern

While you were sleeping: Libya remains key concern

(BusinessDesk) February 25 - Equities in Europe and on Wall Street took another hit, with concern about the impact of Libya’s turmoil still taking centre stage.

As many as 1,000 people may have been killed in the unrest in Libya. Forces loyal to Muammar Gaddafi launched a fierce counter-attack on Thursday, fighting gun battles with rebels who have threatened the Libyan leader by seizing important towns close to the capital. The opposition were already in control of major centers in the east.

In mid-morning trading, the Dow Jones Industrial Average dropped 0.53%, the Standard & Poor's 500 Index lost 0.36% while the Nasdaq Composite Index edged 0.01% lower.

"It's a little early to say we are coming out of [a correction]. The market was set up to sell off and the geopolitical issue was a good excuse," Benny Lorenzo, chief executive at Kaufman Bros., a New York-based investment bank, told Reuters.

The CBOE Volatility index, the market’s so-called fear gauge, fell for the first day in three, declining 4.1% from its highest level in nearly three months.

Limiting losses on the Nasdaq, Priceline.com Inc climbed more than 8% after several brokerages raised their price targets on the stock. The online travel agency’s profit, announced late Wednesday, topped estimates.

While General Motors Co also reported profit that surpassed expectations, the stock declined almost 5%.

E*Trade Financial Corp dropped more than 4% after it said Citadel LLC would reduce its stake in the online brokerage to less than 20%.

Among the latest economic indicators were figures showing purchases of new houses in the U.S. dropped a larger-than-expected 13% in January.

On a more optimistic note, applications for unemployment insurance dropped in the week ended February 19. That means claims have declined in three of the past four weeks.

The U.S. dollar weakened, declining 0.38% against a basket of currencies.

Earlier in the session, the greenback fell to a record low of 0.9240 Swiss franc on electronic trading platform EBS. It recently was 0.7% lower at 0.9260 franc.

The Swiss franc climbed to a record against its U.S. counterpart, as the ongoing turmoil in the Middle East bolstered the appeal of the safe-haven currency.

"The focus is on the Middle East and oil prices. Everybody and his mother has upgraded their forecasts on oil prices, with one even forecasting oil to hit US$200 per barrel," Ron Simpson, director currency research at Action Economics in Tampa, Florida, told Reuters. "That has weighed on the [U.S.] dollar."

After soaring more than 7.5% earlier in the session, oil gave up some of its gains, after a Saudi Arabian official said OPEC nations would help make up for production lost in Libya.

Unrest in Libya, the world's 12th-biggest exporter, has cut at least 400,000 barrels per day from the nation's 1.6 million barrels per day output, according to Reuters calculations

Earlier today, major banks had warned that an output loss from another oil producer after Libya would lead to global shortages and demand rationing and said OPEC needed to act quickly as the oil rally could derail economic recovery.

Goldman Sachs issued a note saying the world would not be able to cope with another Libya-style oil production outage as Brent oil prices rallied by over $8.50 a barrel to near $120 a barrel.

Italian oil firm ENI said Libya had lost three quarters of its production.

Gold held near seven-week highs on Thursday, as the increase in oil prices has brought the spectre of inflation to the forefront of investors' minds.

Spot gold was 0.1% higher at US$1,413.10 an ounce by 7.12am EST, while U.S. April gold futures were unchanged at US$1,413.80.

"The support we've seen for gold, given what is happening in the Middle East, is obviously to do with the political issues, but I think it's got more to do with the rising inflation expectations on the back of the rapidly increasing oil price," Standard Bank analyst Walter de Wet told Reuters, adding that the precious metal could see further gains.

"Given that we've got negative real interest rates once again and higher oil prices ... we think there's still a couple of bucks in there," he said.

(BusinessDesk)

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