London - World stocks fell for the third straight day on Friday partly on growing tensions in Egypt after President Hosni Mubarak disappointed protesters hoping he would resign, though oil and the dollar advanced.
They did so partly because of the Egypt crisis, Asian stocks were on the course for their biggest weekly loss in nine months and European shares were down. US stock index futures also fell, indicating a weak open on Wall Street.
However, the safe-haven Swiss franc fell against the dollar after Swiss consumer price inflation eased slightly and gold eased.
Egypt’s people-power protesters, reeling with disillusion and anger, planned massive new demonstrations on Friday but the powerful army guaranteed the lifting of 30-year-old emerging laws and free and fair elections in a bid to end the popular uprising.
Egypt five-year credit default swaps, insurance-like contracts against debt default, rose 39 basis points to 380 bps.
“Everyone had hoped the situation in Egypt was going to go smoothly, but the chances of this are small,” Koen De Leus, strategist at KBC Securities Bolero in Brussels, said.
“There is going to be nervousness in the market and there are worries of possible contagion in other Middle Eastern countries.”
World stocks measured by MSCI All-Country World Index fell 0.5%, down for the third day in a row partly hit by disappointment with corporate earnings. The index, however, is still up 2.6% so far this year.
The MSCI emerging market index dropped 0.6%, and is down 6% since the beginning of the year as some investors shift out of the booming emerging markets on concerns over inflation and bet on improving growth in the United States.
MSCI’s index of Asia Pacific shares-ex-Japan fell more than 4% this week, set for its worst performance since May 2010. Oil higher
Worries that rising tensions in Egypt could spread disorder to other countries in the oil-rich region sent US crude futures up 0.3% to $87 a barrel and ICE Brent crude up 0.6% to $101.51 per barrel.
“Yesterday, there were the ups and downs of hopes that the situation in Egypt was going to be resolved, but that did not happen,” said David Cohen, economist at Action Economics in Singapore.
“So, there’s still a degree of uncertainty hanging. The politics in Cairo remains a source of pressure on oil prices.”
Higher oil prices would put further pressure on the inflationary situation in emerging economies, threatening to hamper global growth and exaggerate the shift of funds out of emerging markets to developed countries.
The 18th day of unrest in Egypt also helped the dollar, which was up 0.5% against a basket of currencies. The US currency was up 0.4% at 0.9731 francs.
Yields on 10-year US Treasuries fell 4 basis points to 3.6588%.
In Europe, the FTSEurofirst 300 index lost 0.7%, though it is still up 3.5% this year, and the euro fell 0.5% to $1.3522.
Portugal’s stocks dropped 0.9%, though the country’s 10-year Portuguese debt yield was little changed on the day at 7.326%, steady relative to euro zone benchmark German Bunds, after rising to 7.656% on Thursday to top the previous record set in November.
“Portugal faces a huge round of debt redemptions in April and with current yields on Portuguese debt holding just below post-euro creation highs it is not unreasonable to fear that Portugal may need some sort of financial support this spring,” said Jane Foley, senior currency strategist at Rabobank.