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Markets roiled by oil prices spike, Portugal woes

Pan Pylas, AP Business Writer

A woman walks past a bank electronic board showing the Hong Kong share index outside a Hong Kong local bank Wednesday, July 3, 2013. Asian stocks slid on Wednesday as Egypt's unfolding political crisis pushed the price of oil to its highest level in more than a year, adding to an uncertain global economic outlook. Hong Kong's Hang Seng dropped 1.8 percent to 20,281.62. (AP Photo/Vincent Yu)

LONDON (AP) -- Financial markets were roiled Wednesday as Egypt's unfolding political crisis pushed the price of oil to its highest level in more than a year and Portugal's government teetered on the edge of collapse.

While the benchmark New York oil price rose above $100 a barrel for the first time since last May, stocks around the world were piling up the losses, particularly in Portugal where the main PSI stock index was trading 5.4 percent lower after two leading Cabinet members quit the government.

The interest yield on the country's benchmark 10-year bond also spiked nearly a percentage point higher to 7.36 percent, a clear signal that investors are fretting about the future of the bailed-out country and its efforts to get a handle on its debts. There are fears that other Cabinet members will quit over the government's austerity program and that may signal early elections and ensuing uncertainty.

"It looks as if we could be headed for another summertime crisis in the eurozone, as Portugal's government crumbles and bond yields spike," said David Madden, market analyst at IG.

In Europe, stock markets everywhere were down sharply. The FTSE 100 index of leading British shares was down 1.7 percent at 6,199 while Germany's DAX fell the same rate to 7,775. The CAC-40 in France was 1.6 percent lower at 3,682.

Wall Street was poised for a weak opening, with Dow futures and the broader S&P 500 futures 0.6 percent lower. U.S. stock markets will close at 1 p.m. on Wednesday ahead of the Independence Day holiday on Thursday and will re-open Friday.

The main focus of interest later will be on the monthly report from private payrolls firm ADP for any clues ahead of Friday's official nonfarm payrolls data.

"This could well exacerbate the volatility but ultimately with so much uncertainty in play it's going to be difficult to avoid the temptation to keep taking money off the table," said Mike McCudden, head of derivatives at Interactive Investor.

Ahead of the ADP figures, the dollar was trading steadily against the euro, which was 0.1 percent lower at $1.2962.

Earlier, Asian markets also closed lower with Japan's Nikkei 225 down 0.3 percent to 14,055.56 as the yen rallied against the dollar — a rising yen is a sign investors are wary but it makes Japanese goods more expensive in export markets. The dollar was 1.1 percent lower at 99.72 yen.

Elsewhere in Asia, Hong Kong's Hang Seng shed 2.5 percent to 20,147.31 while Seoul's Kospi fell 1.6 percent to 1824.66. In China, the Shanghai Composite lost 0.6 percent to 1,994.27 following disappointing manufacturing data.

The sell-off came as embattled Egyptian President Mohammed Morsi vowed not to resign despite the demands of millions of protesters and a threat by military to suspend the constitution, disband parliament and install a new leadership.

Egypt is not an oil producer but its control of the Suez canal — one of the world's busiest shipping lanes, which links the Mediterranean with the Red Sea — gives it a crucial role in maintaining global energy supplies.

The benchmark New York rate was up $1.47 at $101.05 a barrel.


Kay Johnson in Bangkok contributed to this report.