US stocks slump as Egypt tension rises

Fears about the overthrow of Egypt’s dictator rocked Wall Street, sending US stocks to their biggest one-day drop in two months.

Oil prices surged and shares of tankers and shippers climbed as investors bet on a shutdown of the Suez Canal.

The Dow Jones Industrial Average had dropped 166.13 points, or 1.4%, to 11823.70 at the close (10am NZ time).

The decline sent Dow stocks down for the week, ending an eight-week winning streak that would have been longest weekly run since 1995.

At its lowest, the measure was down nearly 178 points, the biggest intraday point decline since November 23.

The protests in Egypt, which are threatening President Hosni Mubarack’s 30-year rule, overshadowed other concerns about the global economy.

The US economy grew at an annualised rate of 3.2% in the past three months of 2010, more than the 2.6% rise in the third quarter but slightly below market expectations.

The Chicago Board Options Exchange Market Volatility Index (VIX), or “fear guage,” touched an intraday high of 19.86, a level not seen since December 2.

The S&P 500 index declined 1.8% to 1276.34, while the Nasdaq Composite Index tumbled 2.5% to 2686.89.

Other markets: Europe, Asia down
European markets slumped, with French and UK stocks posting particularly steep losses.

Stocks continued to drop into the close as the fourth day of demonstrations in Egypt turned violent and a curfew was imposed as the army brought out its tanks into the streets.

The Stoxx Europe 600 index dropped 0.9% to end at 280.45. The UK's FTSE 100 index fell 1.4% to 5881.37, France's CAC 40 index sank 1.4% to 4002.32 and the German DAX 30 index shed 0.7% to 7102.80.

In Tokyo, the Nikkei Stock Average dropped 1.1% to 10,360.34, pressured after ratings firm Standard & Poor's cut the country's longterm credit rating.

Korea’s Kospi slipped 0.3% to 2107.87, its first loss of the week. That still left it with a 1.8% climb for the week.

Australia's S&P/ASX 200 gave up 0.6% to 4774.89 and Hong Kong's Hang Seng index declined 0.7% to 23,617.02, its sixth loss in seven sessions.

China's Shanghai Composite edged up 0.1% to 2752.75. Taiwan's Taiex added 0.5% to 9145.35 ahead of Chinese New Year holidays that will keep it closed until February 8. Many other Asian markets will close late next week for the holidays.

Commodities: Oil, gold up
Oil prices surged as the large-scale demonstrations in Egypt touched off fears of unrest spreading in the Middle East to major oil-producing states.

Light, sweet crude for March delivery rose $US3.70, or 4.3%, to settle at $US89.34 a barrel in New York. Brent crude on the ICE futures exchange gained $US2.03, or 2.1%, to $US99.42 a barrel, the highest settlement in 16 months.

Investors also rushed into gold, helping the metal bounce from nearly four-month lows.

Gold for February delivery rose $US22.30, or 1.7%, to settle at $US1340.70 an ounce in New York.

Currencies: Euro down, yen up
The euro weakened broadly and sharply as concerns about political unrest in Egypt sparked demand for safe-haven currencies such as the US dollar and the Swiss franc.

The euro fell to session lows around $US1.3594, more than a full cent below an earlier session high. The euro fell by more than 2% against the yen to trade at ¥111.63.

Against the yen, the dollar was also sharply weaker on the day, trading near ¥82. Against the Swiss franc, the euro traded near 1.2820.