* Stocks hit as Middle East unrest feared
* Oil gets boost, Treasuries and gold too
* Dollar, Swiss franc benefit from flight to safety
(Updates with U.S. markets close)
By Al Yoon
NEW YORK, Jan 28 (Reuters) - Stock markets around the world
slumped, crude oil prices surged and the dollar gained on
Friday as images of escalating violence and chaos in Egypt
gripped investors and raised concerns the protests will spread
across the Middle East.
Money managers, who in recent months had been accelerating
moves into riskier assets, dumped stocks and piled into
safe-haven investments like U.S. Treasuries, the dollar and
gold as non-stop media coverage of skirmishes between
protesters and Egyptian police overwhelmed all other news.
Wall Street's benchmark S&P 500 index suffered its biggest
one-day loss in six months.
Some said the sudden eruption of violence could spur a
longer-term sell-off after a strong rally in riskier assets
like stocks and emerging markets.
"I think the next two to three weeks, the crisis in Egypt
and potentially across the Middle East might be an excuse for a
big sell-off of 5 percent to 10 percent," Keith Wirtz,
president and chief investment officer at Fifth Third Asset
Management in Cincinnati.
Traders and investors fear the protests could spread across
the oil-rich region and lead to disruptions to Middle East
commerce. Global political pressure could also heat up because
of the security threat posed to Israel by deepening instability
to a key regional ally.
U.S. crude futures <CLc1> surged more than 4 percent.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^Mubarak orders army to back police against unrest []
TAKE-A-LOOK-Egypt's unprecedented protests []
Map, economic profile of Egypt http://link.reuters.com/fez67r
Egypt unrest hits equities with Middle East ties []
Reuters Insider: Egypt Violence Grows, Clinton Urges Calm
http://link.reuters.com/wuh77r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
U.S. Treasury debt, gold and Swiss francs, all traditional
safe-haven investments, benefited from the sudden shift in
market sentiment. Gold prices jumped 2 percent.
"This could really encompass the region. Egypt is really
the pivot point in the entire Arab world and has implications
for things like the price of oil," said Dan Dorrow, head of
research at FX advisory and execution firm Faros Trading in
Stamford, Connecticut.
"If Monday looks a lot like today, then the political risk
premium will swamp any kind of of central bank and economic
fundamentals and we could see more safe-haven moves to the
Swiss franc."
On Wall Street, shares fell from 29-month highs and the
CBOE Volatility Index, or VIX <.VIX>, a broad measure of market
anxiety, soared 23 percent.
Disappointing results by high-profile companies, including
Amazon.com and Ford Motor Co, added to the negative sentiment
caused by the turmoil in Egypt.
Energy stocks declined despite the surge in oil prices as
uncertainty over the weekend developments in Egypt and anemic
growth in Chevron's <CVX.N> oil reserves kept investors
jittery.
The Dow Jones industrial average <> dropped 166.13
points, or 1.39 percent, to 11,823.70. The Standard & Poor's
500 Index <.SPX> slid 23.19 points, or 1.78 percent, to
1,276.35 and the Nasdaq Composite Index <> fell 68.30
points, or 2.48 percent, to 2,686.98.
Nearly 10 billion shares traded on the Nasdaq, New York
Stock Exchange and the American Stock Exchange for the heaviest
trading day of the year, and topping last year's estimated
daily average volume of 8.47 billion shares.
"The market response to earnings in Microsoft, Amazon and
Ford is disappointing," said Peter Boockvar, equity strategist
at Miller Tabak & Co in New York. "Then you throw in Egyptian
riots possibly spreading ... we're going into a weekend where
anything is possible in Egypt," he said.
U.S. crude for March delivery ended up $3.70, or 4.32
percent, to settle at $89.34 per barrel on the New York
Mercantile Exchange. Spot gold <XAU=> rose $24.39 to $1,335.50
an ounce.
Benchmark 10-year Treasuries note yields dropped 0.05
percentage point to 3.34 percent as investors also sought
safety in U.S. government securities.
The political unrest overshadowed economic data in the
United States that showed a recovery was on track.
U.S. gross domestic product data for the final quarter of
2010 showed the biggest gain in consumer spending in more than
four years, and with strong exports, offered the clearest
signals yet that a sustainable recovery is under way.
[]
Ford <F.N> tumbled more than 13 percent after reporting a
steep drop in its quarterly profit after a charge for debt
payments. "Ford results were pretty ugly," said James Dailey,
portfolio manager of TEAM Asset Strategy Fund in Harrisburg,
Pennsylvania.
Amazon.com Inc's <AMZN.O> revenues missed expectations late
Thursday. Shares of the online retailer fell 8 percent.
In Europe, the FTSEurofirst 300 index <> fell 0.95
percent, reflecting worry about Suez Canal trade, crucial to
Europe's imports of oil and Asian goods.
Japan's Nikkei average <> ended down 1.1 percent --
still weighed by a sovereign debt rating downgrade -- while the
MSCI world equity index <.MIWD00000PUS> dropped 1.44 percent.
Emerging market stocks <.MSCIEF> fared worse, falling 1.5
percent.
Israeli ADRs tumbled, as the country has the most liquid
market in the Middle East and potentially faces the biggest
security threat from Middle East instability. The BNY Mellon
index of leading Israeli ADRs <.BKIL> slid 1.94 percent.
In currencies, the dollar gained against a basket of major
trading-partner currencies, with the U.S. Dollar Index <.DXY>
up 0.53 percent at 78.142. The euro <EUR=> declined 0.82
percent at $1.3613.
"If the Mubarak government falls, the next few days could
see some heavy U.S. dollar and Swiss Franc safe-haven buying,"
said Joseph Trevisani, chief market analyst at FX Solutions in
Saddle River, New Jersey.
Against the Japanese yen, the dollar <JPY=> fell 0.89
percent at 82.12 yen.
(Additional reporting by Ellen Freilich, Rodrigo Campos and
Chuck Mikolajczak in New York, and Doris Frankel in Chicago;
Editing by Leslie Adler)
