Mubarak resignation cheered by world markets
Egyptian President Hosni Mubarak's decision to hand power to the military boosted stocks around the world on Friday as hopes grew for a peaceful transition of power.business Updated: Feb 11, 2011 22:12 IST
Egyptian President Hosni Mubarak's decision to hand power to the military boosted stocks around the world on Friday as hopes grew for a peaceful transition of power.
Markets had earlier been lower after Mubarak defiantly held onto his position in a speech the day before, fueling concerns that the political standoff was a long way from being resolved. That sentiment was lifted when Vice President Omar Suleiman told state TV that Mubarak had resigned.
"In these difficult circumstances that the country is passing through, President Hosni Mubarak has decided to leave the position of the presidency," Suleiman said. He has commissioned the armed forces council to direct the issues of the state." Stocks jumped across the board on the news.
In Europe, Germany's DAX traded up 0.4% to 7,371.01 while the FTSE 100 index of leading British shares gained 0.7% to 6,060.94. The CAC-40 in Paris was 0.3% higher at 4,092.51. All had been lower earlier in the day.
After opening lower, Wall Street likewise rallied. The Dow Jones industrial average rose 0.2% to 12,254.34 while the Standard & Poor's 500 index was 0.3% higher at 1,325.81. The news from Egypt also weighed down on oil prices, which had rallied in recent weeks on fears of the impact on crude transportation. By late afternoon in Europe, the benchmark crude for March delivery was down 30 cents at $86.43 a barrel in electronic trading on the New York Mercantile Exchange.
Though Egypt is not a big oil producer, traders were worrying that the unrest might spread to other countries and affect the Suez Canal _ a key route for oil tankers and cargo ships as they steer from the Persian Gulf to the major oil-consuming nations in Europe. In corporate news, Nokia Corp. shares slumped 14% after it revealed a strategic alliance with Microsoft Corp. to build smart phones that can compete with rivals Apple and Google. Analysts said the deal, which was more of a win for Microsoft, showed how desperate Nokia is to get back into the lucrative market. The company also warned its profits would be hurt in coming quarters as it adjusted and restructured.
Fears that Europe's debt crisis may be about to return have started to haunt the euro following a few weeks of relative calm amid signs that EU leaders were preparing a comprehensive solution. However, last week's limited progress in a summit of EU leaders in Brussels reminded investors that the crisis is a long way from being settled and that Portugal could still end up joining Greece and Ireland in getting a bailout.
"All is not well in the eurozone and we expect the pot to shift from the back burner to the front over the next few weeks," said Jeremy Batstone-Carr, head of private client research at stockbrokers Charles Stanley. "We believe that the eurozone is approaching another crunch moment and that investors should be wary regarding the potential for a disorderly denouement." As well as warning of the continued stresses in the banking sector, Batstone-Carr noted that the yield on Portugal's ten-year bonds has spiked above 7% for the first time since a bond auction in January met with widespread investor support and eased concerns that the country would need a bailout imminently. Portugal has two major bond maturities soon, which it will have to roll over if it's to avoid the fate of Greece and Ireland. "We are unsure as to whether the country has the funds necessary to redeem these bonds and we suspect that it will once again have to rely heavily on external sources," Batstone-Carr said. Ireland is also in focus as the country gears up for a general election on Feb. 25. Leading ratings agency Moody's Investors Service on Friday downgraded the creditworthiness of six Irish banks, citing doubts over whether the banks will get a new cash infusion which was due at the end of the month.
The current government has put off the issue until after the election, and the opposition parties most likely to form the next government oppose further aid for banks.
Polls indicate that the main Fine Gael opposition party will form the next government in coalition with Labour.
By late morning London time, the euro was 0.4% lower at $1.3555 while the British pound was down 0.6% at $1.6003. The U.S. currency was also 0.1% firmer at 83.35 yen. Earlier in Asia, South Korea led the retreat, tumbling 1.6% after the country's central bank suggested it will raise rates in coming months. The Bank of Korea unexpectedly raised the rate in January for the second time in three months. Australia's S&P/ASX 200 let go of the previous day's gains, dropping 0.7%, while Hong Kong's Hang Seng rose 0.5%. Mainland Chinese shares ended the week on an upbeat note, with the benchmark Shanghai Composite Index gaining 0.3% and the Shenzhen Composite Index of China's smaller, second exchange up 1.1%.