Markets rally back on hopes of end to Libya conflict Skip to main content

Markets rally back on hopes of end to Libya conflict

Libyan rebels celebrating Fighting between the government and Libyan rebels has affected oil exports from the country
Stock markets in Europe have rebounded, led by shares in energy firms, on hopes that fighting in Libya may soon end.

London's FTSE 100 and the Cac 40 in Paris were both more than 2.5% up by early Monday afternoon.

The rally follows a 5% to 10% slump on most markets on Thursday and Friday on recession fears in the US and Europe.

Oil prices initially fell on hopes that Libyan crude would soon come back on tap, before rising again on greater optimism about the global economy.

Business opportunities
 
During Asian trading hours, news from Libya combined with lingering anxiety over the economy to push the price of Brent crude futures down 3.2% to $105.15 a barrel.
But as shares rose steadily following the opening of trading in Europe, oil prices also recovered.

By early afternoon in London, Brent was down just 0.9% at $107.66 a barrel, while US sweet, light crude was up 1% at $83.61.

Brent Crude Oil Futures $/barrel

Last Updated at 22 Aug 2011, 13:30 GMT *Chart shows local time Brent Crude Oil Future intraday chart
price change %
106.98 -
-1.64
-
-1.51
Leading the rebound in stocks were the European energy firms best placed to exploit future Libyan business opportunities.

Italian oil firm ENI - the most active foreign company in Libya before the conflict began - jumped 6.4%, while France's Total rose 4.2%, and Shell climbed 3.7%.

Exploration firms Cairn Energy and Afren - both active in Africa - rose 4.5% and 5.2% respectively.

Oil industry engineering and servicing firms also received a boost from strong financial results announced by Petrofac. The UK firm rose 3.6%, while French rival Technip jumped 3.9%.

In Milan, other non-energy businesses did well, reflecting the close business links between Italy and Libya.

The FTSE MIB index of 40 leading stocks rose 3.75%, outstripping other European bourses.
Transport and communications firm Ansaldo - which has many contracts with Libya - jumped 7.6%.

Increased supplies?
 
Markets are hoping that an end to the conflict in Libya will see the country's oil exports restored, increasing global supplies.

Libya is the world's 12th-largest oil exporter.

Analysts said oil prices were likely to fall further as the political situation in the country unfolds.

Before the start of the conflict, Libya produced 1.6 million barrels a day of crude oil, or about 2% of the world's output.

Start Quote

In the long run macroeconomic issues will play a huge role in determining which way the oil prices are headed”
Avtar Sandhu Phillip Futures
 
But as the political unrest in the country intensified, the majority of that production was hit, taking a toll on global oil supply.

"Once they get back to recovery mode, a million barrels per day are expected to enter the global supply," Jonathan Barratt of Commodity Broking told the BBC.

"This will add weight to the decline in oil prices that we have seen recently," he added.

Macroeconomic factors
 
However, some analysts said that even though the Libyan conflict seemed to be heading towards an end, there was still uncertainty about how fast the country's oil production could be restored to the pre-conflict levels.

"It will take a long time for them to repair the production facilities and get back on track," Avtar Sandhu of Phillip Futures told the BBC.

"What we are seeing today is more of a psychological selling."

Oil prices have also been hit by concerns in the past month that demand may be hurt by a slowdown in the global economy.

On Monday, the Organisation for Economic Co-operation and Development (OECD) confirmed that growth in the world's main industrialised economies had slowed for the fourth quarter in a row during the three months to June.

The trend was most marked in the eurozone, where growth fell to 0.2% versus a year earlier, compared with 0.8% in the previous quarter.

"We can count on slower economic growth in US and Europe, and that is going to impact demand for oil," Victor Shum of Purvin and Gertz told the BBC.

Analysts said that, with two of the world's biggest economic zones struggling to boost growth, oil prices are likely to slide.

"In the long run, macroeconomic issues will play a huge role in determining which way the oil prices are headed," Phillip Futures' Mr Sandhu said.

Japan threat
 
Markets saw heavy falls on Thursday and Friday last week on recession fears, and the negative sentiment carried over into Asian trading hours on Monday.

In Japan, the Nikkei ended the day 1% lower, although Hong Kong's Hang Seng index ended up 0.45% after a late rally.

US Dollar v Japanese Yen

Last Updated at 22 Aug 2011, 13:56 GMT USD:JPY twelve month chart
$1 buys change %
76.7550 +
+0.22
+
+0.28
Haven investments also did well during Asian trading, but then fell back as European shares rallied.

The price of gold had risen 2.3% prior to the Europe open, to hit yet another record high, of $1,894.5 per troy ounce - before sliding sharply.

The Japanese yen held steady half-a-yen above the record level of 76.1 yen to the dollar it set on Friday.

Japan's finance minister Yoshihiko Noda reiterated the government's readiness to intervene if the currency strengthened further.

"We will watch markets even more closely than before to see whether there is any speculative activity," he said.

"We won't rule out any measures and will take decisive action when necessary."

Meanwhile, the Swiss franc - another popular haven currency - weakened against the euro. The Swiss authorities intervened last week to curtail the strength of their currency.

Currency movements are also being driven by speculation that the US Federal Reserve chairman, Ben Bernanke, will hint at further monetary stimulus measures in a major speech at Jackson Hole in Wyoming on Friday - something that is likely to weaken the dollar.

http://www.bbc.co.uk/news/business-14610908

Comments

Popular posts from this blog

Chronology of the Press in Burma

1836 – 1846 * During this period the first English-language newspaper was launched under British-ruled Tenasserim, southern  Burma . The first ethnic Karen-language and Burmese-language newspapers also appear in this period.     March 3, 1836 —The first English-language newspaper,  The Maulmain Chronicle , appears in the city of Moulmein in British-ruled Tenasserim. The paper, first published by a British official named E.A. Blundell, continued up until the 1950s. September 1842 —Tavoy’s  Hsa-tu-gaw  (the  Morning Star ), a monthly publication in the Karen-language of  Sgaw ,  is established by the Baptist mission. It is the first ethnic language newspaper. Circulation reached about three hundred until its publication ceased in 1849. January 1843 —The Baptist mission publishes a monthly newspaper, the Christian  Dhamma  Thadinsa  (the  Religious Herald ), in Moulmein. Supposedly the first Burmese-language newspaper, it continued up until the first year of the second Angl

ARSA claims ambush on Myanmar security forces

Arakan Rohingya Salvation Army (ARSA) on Sunday claimed responsibility for an ambush on Myanmar security forces that left several wounded in northern Rakhine state, the first attack in weeks in a region gutted by violence. Rakhine was plunged into turmoil last August, when a series of ARSA raids prompted a military backlash so brutal the UN says it likely amounts to ethnic cleansing of the Muslim Rohingya minority. The army campaign sent some 650,000 Rohingya fleeing for Bangladesh, where refugees have given harrowing accounts of rape, murder and arson at the hands of security forces and vigilantes. Myanmar's military, which tightly controls information about Rakhine, denies any abuses and insists the crackdown was a proportionate response to crush the "terrorist" threat. ARSA have launched few attacks in recent months.  But the army reported that "about ten" Rohingya terrorists ambushed a car with hand-made mines and gunfire on Friday morning

Thai penis whitening trend raises eyebrows

Image copyright LELUXHOSPITAL Image caption Authorities warn the procedure could be quite painful A supposed trend of penis whitening has captivated Thailand in recent days and left it asking if the country's beauty industry is taking things too far. Skin whitening is nothing new in many Asian countries, where darker skin is often associated with outdoor labour, therefore, being poorer. But even so, when a clip of a clinic's latest intriguing procedure was posted online, it quickly went viral. Thailand's health ministry has since issued a warning over the procedure. The BBC Thai service spoke to one patient who had undergone the treatment, who told them: "I wanted to feel more confident in my swimming briefs". The 30-year-old said his first session of several was two months ago, and he had since seen a definite change in the shade. 'What for?' The original Facebook post from the clinic offering the treatment, which uses lasers to break do