Jefferson City, MO 79° View Live Radar Thu H 18° L 7° Fri H 24° L 9° Sat H 34° L 29° Weather Sponsored By:

Stocks take another pounding amid oil price fears

Stocks take another pounding amid oil price fears

March 2nd, 2011 by PAN PYLAS, AP Business Writer in News

LONDON (AP) - Stocks took a pounding Wednesday as oil prices edged higher once again amid concerns over how the crisis in Libya will end now that the oil-rich North African country is effectively split in two.

Insecurity has spread through markets as the international community remains at odds about how forcefully to intervene in Libya and the regime of longtime leader Moammar Gadhafi claws back some ground lost to the rebels.

Coupled with concerns that the uprisings, which have already brought down the leaders of Tunisia and Egypt, could spread to other oil-rich countries in the Middle East, oil prices rose further to near last week's highs.

By mid morning London time, a barrel of crude on the New York Mercantile Exchange was trading 17 cents higher at $99.80 while the equivalent Brent rate in London rose 61 cents to $116.03. Both rates are now edging up to last week's levels, when the New York rate hit $102 a barrel and the Brent rate neared $120.

The growing view that this oil price spike is here to stay has heaped increasing pressure on stocks over the last couple of days. Over recent weeks, stocks have traded in opposite directions to energy prices. When they rise, investors get worried about the impact on the global economic recovery; when they fall they breathe a sigh of relief that the damage won't be too bad.

"Markets remain hostage to oil price moves," said Hans Redeker, an analyst at BNP Paribas.

In Europe, shares followed their Asian counterparts lower.

The FTSE 100 index of leading British shares was down 1.1 percent at 5,873 while Germany's DAX fell 1.3 percent to 7,132. The CAC-40 in Paris was 1.3 percent lower at 4,014.

Wall Street was poised for further selling at the open following a disappointing session on Tuesday, which sent the major indexes down over 1 percent - Dow futures were down 18 points at 12,006 while the broader Standard & Poor's 500 futures fell 2.1 points to 1,299.

Events in the Middle East and North Africa will likely remain at the forefront of investors' thoughts, especially if Saudi Arabia, the world's biggest oil exporter, were to become embroiled in a similar uprising. Then many analysts think oil prices could rise to $200 a barrel, with damaging consequences for the economy. Not only would growth be hit but inflation would spike up sharply, too.

"The widespread nature of the protests suggest that the uncertainty could linger for some time yet," said Terry Pratt, institutional trader at IG Markets.

Investors across all markets will also be keeping a close watch on a raft of economic news in the run-up to the week's end. The monthly survey from the ADP private payrolls firm later could well alter expectations over this Friday's official government data, which often set the market tone for a week or two after their release.

In the currency markets, investors are awaiting Thursday's monthly press conference from European Central Bank president Jean-Claude Trichet, which could have a bearing on market expectations for when the bank will start raising interest rates.

By mid morning London time, the euro was up 0.1 percent on the day at $1.3788 while the dollar was 0.1 percent firmer at 81.93 yen.

Earlier in Asia, Japan's benchmark Nikkei 225 stock average slid 2.4 percent to 10,492.38 while South Korea's Kospi slipped 0.6 percent to 1,928.24. Hong Kong's Hang Seng index was down 1.5 percent to 23,048.66.

Chinese shares edged lower as investors cashed in on recent gains before the opening later this week of the annual session of the national legislature.

The benchmark Shanghai Composite Index lost 0.2 percent to 2,913.81, while the Shenzhen Composite Index for China's second, smaller exchange lost 0.5 percent to 1,292.99.


Pamela Sampson in Bangkok contributed to this report.