FINANCIAL MARKETS WERE roiled today as Egypt’s unfolding political crisis pushed the price of oil to its highest level in more than a year and Portugal’s government teetered on the edge of collapse.
While the benchmark New York oil price rose above $100 a barrel for the first time since last May, stocks around the world were piling up the losses, particularly in Portugal where the main PSI stock index was trading 5.4 per cent lower after two leading Cabinet members quit the government. We’ve seen the Egyptian situation before – remember this?
Egypt is not an oil producer but its control of the Suez canal — one of the world’s busiest shipping lanes, which links the Mediterranean with the Red Sea — gives it a crucial role in maintaining global energy supplies.
Table: FinViz
The interest yield on the country’s benchmark 10-year bond also spiked nearly a percentage point higher to 7.36 per cent, a clear signal that investors are fretting about the future of the bailed-out country and its efforts to get a handle on its debts. There are fears that other Cabinet members will quit over the government’s austerity program and that may signal early elections and ensuing uncertainty.
“It looks as if we could be headed for another summertime crisis in the eurozone, as Portugal’s government crumbles and bond yields spike,” said David Madden, market analyst at IG.
In Europe, stock markets everywhere were down sharply. The FTSE 100 index of leading British shares was down 1.7 per cent at 6,199 while Germany’s DAX fell the same rate to 7,775. The CAC-40 in France was 1.6 per cent lower at 3,682.
Wall Street was poised for a weak opening, with Dow futures and the broader S&P 500 futures 0.6 percent lower. US stock markets closed at 1 pm today ahead of the Independence Day holiday on Thursday and will re-open Friday.
The main focus of interest later will be on the monthly report from private payrolls firm ADP for any clues ahead of Friday’s official nonfarm payrolls data.
“This could well exacerbate the volatility but ultimately with so much uncertainty in play it’s going to be difficult to avoid the temptation to keep taking money off the table,” said Mike McCudden, head of derivatives at Interactive Investor.
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