Escalating protests in Egypt jarred world financial markets on Friday. Stocks fell while the dollar, Treasurys and gold rose as investors sought to reduce their exposure to risk.
The Egyptian government’s response to widespread street protests unnerved investors. The military was deployed in an effort to quell the protests and the headquarters of the ruling party was on fire. Thousands of people defied a curfew, and Internet and cell phone service has been cut off.
Earlier, riot police fired tear gas, rubber bullets and used water cannons to disperse crowds that had gathered in the largest challenge to Egyptian president Hosni Mubarak’s thirty-year rule. The fall of the Tunisian government two weeks ago has raised concerns that other authoritarian governments in the Middle East could also be toppled.
“The safety trade is back,” said Jeffrey Frankel, president of broker Stuart Frankel & Co. “Gold is up. Oil is up. Anything related to overseas is getting hit.”
Prices of Treasury bonds, considered one of the safest assets, rose sharply. The yield on the benchmark 10-year Treasury note fell to 3.33 percent from 3.38 percent late Thursday. Bond yields fall when their prices rise.
The dollar rose 0.5 percent against an index of six other currencies as investors sought safety. Gold rose 1.7 percent to settle at $1,340.70 and crude oil rose 4.3 percent to $89.34 a barrel.
The Egyptian stock market isn’t open on Fridays. The market’s main index fell 10.5 percent Thursday.
The MSCI World Market index, the broadest measure of the world’s stock markets, slumped 1.4 percent.
“Traders are watching this flare-up in the Middle East and using it as a reason to take profits,” said Doug Godine, managing director at Signal Hill, an investment bank.
Of the 30 large company stocks that make up the Dow Jones industrial average, 28 fell. The two exceptions, Procter & Gamble and DuPont, were flat.
The Dow fell 166.13 points, or 1.4 percent, to close at 11,823.70. That’s the worst one-day drop since Nov. 16.
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