The news from Egypt and the Middle East is trumping everything else in the financial markets now.
The situation continues to worsen in Egypt where President Hosni Mubarak has imposed a 6 p.m. to 7 a.m. curfew in the cities of Cairo, Suez, and Alexandria in an attempt to suppress a challenge to the survival of his 30-year-old regime. The Associated Press, citing Egyptian state television, is reporting that the headquarters of Mubarak’s ruling National Democratic party is on fire. The government has shut down Internet and mobile phone service in effort to disrupt communications among the loosely organized opposition and to limit the transmission of video of the protests and police attacks on protestors out of Egypt. The fourth day of protests began shortly after the end of Friday prayers.
Of course, the shares of any company with a business connection to Egypt are being pummeled today. For example, Apache (APA), which has onshore oil operations in Egypt, is down 2.7% today as of 12:15 New York time after falling 4.8% yesterday.
But the fear in the market isn’t limited to Egypt. Remember that the protests now sweeping Egypt earlier brought down the government of Tunisia. Protests have spread to include Yemen. And, of course, the big worry on Wall Street is that they may grow to include the autocratic regimes that control the bulk of oil in the Middle East in Saudi Arabia and the Gulf states.
That’s why oil futures are going wild today. Brent crude was up 1.7% and West Texas Intermediate was up 4.2% as of 12:18 in New York. (Oil stocks are also up—if they don’t do business in some scary place: Oasis Petroleum (OAS), which pumps its oil in the United States, is up 3.3% this morning.)
And, as happens in most crises, investors have sought the safety of the U.S. dollar (and the Swiss franc) and precious metals. The dollar is up 0.7% against the euro. Gold has climbed 1.6% and silver is up 2.9%. Â (Agnico-Eagle (AEM) is up 2.8% and Silver Wheaton (SLW) is up 3.4%.)
With the dollar climbing and investors rushing for safety, commodity stocks and the shares of recent stock market winners are taking a beating this morning. (Well, given the unpredictability of events, who would want to be long over the weekend?) BHP Billiton (BHP), for example, is down 2.4% and Vale (VALE) is down 3%.
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund, may or may not now own positions in any stock mentioned in this post. The fund did own shares of Agnico-Eagle, BHP Billiton, Oasis Petroleum, Silver Wheaton, and Vale as of the end of December. For a full list of the stocks in the fund as of the end of December see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/.
DVN was up more than 4% on today, Jan.31.
Follow up: DVN ‘s Egypt project is said 400 miles away from Nile delta. (http://www.cnbc.com/id/41319535)
Disclosure: I don’t own DVN.
By the way, market seems stablized this Monday morning.
As a resident of the Arabian Gulf for more than I decade, I would point out that most Gulf Cooperation Countries have made strides toward more representatives forms of government in the past three decades.
The issues in these GCC countries are related to entitlements, job creation, and standard of life issues. Most citizens in the GCC (as contrasted to guest workers or residents) are concerned about living a high quality of life.
Additionally, most observers paint the Middle East in broad brush strokes. The Maghrib, the Levant, the Gulf, and Iran (Persian) have had different histories, different colonial experiences, and different economic standards.
Tim Walters
kripalan, Jim is right about a lot of stuff. Like my wife told me, “get used to it”.
I don’t know if anyone has noticed, but the Indian Stock Index (SENSEX) has already corrected by about 13% since its peak about 5 weeks ago. Jim was right about the emerging and developing markets falling about 20% during this correction.
I agree this is an opportunity. I am itching to buy more BRF, which is approaching a 20% correction, and get into EWZ for some of the Brazilian large cap exposure.
Or OXY or APA. I added to JUBAX today…thanks to Egypt, Igot a discount!
One has to wonder the market is showing some typical knee-jerk reaction. Think about how much impact Egypt would have to the world economy, even if the government collapes. As far as I can see, all the oil producing countries (Saudi, UAE, Qarter, etc.) are quite! That’s all my concern. Don’t forget US forces are in those oil countries. How much the Egypt project would effect DVN’s bottom line? Maybe this is opportunity to pick up some DVN shares.