Markets continue to react on Libya violence, rising oil prices (ISFM) (24-02-2011)

For one more day, escalating violence in Libya with the accompanying sharp rise in oil prices has been dominating world markets. Both crude and Brent oil prices have shot up more than 2 percent. Reports are coming in indicating an imminent show-down, and that is spooking markets further, as oil supplies and delivery look to be becoming more uncertain with every passing hour.

With recent gains decreasing continuously, most markets in Asia fell today, as Japan was leading losses on a stronger yen, which was hurting exporters. The exception was once again mainland China, where shares closed higher.

During the day, oil prices continued to gain: in London, Brent crude for April delivery rose to $114.13, while the New York rate advanced to over $100 a barrel. Among currencies, the euro continued to gain reaching $1.3789, as traders were expecting the BoE and the ECB to act sooner than the Fed in raising interest rates.

With all these developments, concern is intensifying among investors that the labored recovery of recent months could grind to a halt on surging oil prices, exacerbating the stagflation effect.

European stocks were falling across the board, led by Germany’s DAX as weak results from RWE AG and Allianz AG weighed and the Porsche / Volkswagen AG merger looked like fizzling out, on pending legal issues.

On Wall Street, U.S. stocks opened lower as crude-oil futures remained near $100-a-barrel mark on the New York Mercantile Exchange, even as released macro data was showing an improvement in the country’s economy with a drop in jobless claims.

Source: ISFM