Oil prices jumped and Asian stock prices fell yesterday as investors took fright at the unfolding crisis in Libya and turned to safe havens such as government bonds and gold, pushing the precious metal briefly to a seven-week high.
US crude futures hit a two-and-a-half-year high on concern that violence in Libya could cut more of the OPEC member’s oil output and that a similar story could play out in other top oil producers in North Africa and the Middle East.
Brent crude for April delivery rose US$1.12 cents to US$106.86 a barrel by 10:30am GMT, after rising as high as US$108.18 in early trade. On Monday, Brent hit a two-and-a-half-year high of US$108.70.
“The market is very nervous over news of violence in Libya,” said Yinxi Yu, a commodities analyst with Barclays Capital.
Japan’s Nikkei 225 index closed down 1.8 percent and the MSCI’s index of Asia-Pacific shares outside Japan was also off about 1.8 percent.
Airline stocks tumbled across the region on the back of rising oil prices. Korean Air Line Co Ltd led losers, dropping more than 9 percent and Hong Kong’s Cathay Pacific Airways Ltd fell more than 4 percent to a six-month low.
Shares in major South Korean builders also slid as they put their Libyan construction projects on hold. Hyundai E&C shares tumbled more than 9 percent, while Daewoo Engineering & Construction fell 6.3 percent.
RUSH TO GOLD
Gold, a traditional refuge in times of tumult, extended gains and rose to its highest in seven weeks, lifting silver to its strongest level since 1980.
Spot gold prices rose US$3.75 to US$1,409.70 an ounce, but soon drifted back into negative territory. Silver jumped above US$34 an ounce, its highest since 1980, before also falling back to around US$33.33.
European stocks lost more than 1 percent on Monday on a combination of fears over Libya, where Muammar Qaddafi faced a mounting revolt against his 41-year rule, signs of imminent interest rate rises and more evidence of a poor earnings season.
US markets were closed on Monday for a holiday, but US stock futures were sharply lower, suggesting Wall Street was likely to fall when they reopened yesterday.
“There are a lot of people in the marketplace waiting to get in at better levels,” said Todd Martin, Asia equity strategist with Societe Generale in Hong Kong.
“Could we be in for a mid-cycle correction? Absolutely, but from what we are seeing — loose monetary policy and improvements in Europe — I don’t see outrageously overconfident market participants yet. We are in the middle of a bull market. We are getting a proper correction here but long-only money will be buying into this,” he said.
In Asia, Martin recommended clients shift more into equity markets in Taiwan, Japanand South Korea, all of which he said were attractively valued.