Markets slump on fears for Middle East

The FTSE has slumped as the political turmoil in Libya and threat of contagion across the Middle East region sent commodities and stocks sliding.

The FTSE 100 closed down 1.22 per cent to 5,923.53 in a difficult day's trading.

“It’s been a trying few days for world markets, and if the situation in Libya continues to show no tangible sign of a peaceful resolution, the week could plumb greater depths yet,” said Yusuf Heusen, senior sales trader at IG Index.

But Brent crude for April delivery surged to more than $109 per barrel shortly after 2pm, pulled higher by strong demand as the violence and rhetoric in Libya increased.

“The uncertainty has also spread to the German DAX which is down more than one per cent after being fairly flat yesterday, as the auto sector got pummelled on the spiralling oil price. Auto parts manufacturer GKN is down as a result,” said Michael Hewson, market analyst at CMC Markets.

Oil services firm Amec closed highest, though it was up just 0.89 per cent at 1,138p as traders said traders read across from a bullish outlook statement by its Australian peer Worley Parsons.

Other risers were defensive stocks such as Imperial Tobacco Group, which finished up 0.5 per cent at 2,001p, Scottish & Southern Energy (up 0.17 per cent at 1,212p) and Severn Trent (up 0.14 per cent at 1,460p).

Drinks can maker Rexam fell most, down 5.8 per cent to 348.4p after posting full-year results.

"Company news has taken a back seat to a certain extent with one of the biggest fallers being can company Rexam, despite posting better than expected profits for 2010," Hewson said.

Miners were also hit hard as commodities weakened on the Middle East concerns, and investors opted to sell riskier stocks. Antofagasta, Xstrata, Lonmim and ENRC were all among the ten worst performers.

As oil prices rose, fuel-hungry cruise operator Carnival again felt the pinch, closing down 4.17 per cent at 2,645p.

On the FTSE 250, Cable & Wireless Communications stormed up 6.15 per cent to close at 49.33p after it said it was selling its Bermuda business to The Bragg Group for $70m – and buying back $100m worth of shares.

And software group Logica closed down 5.37 per cent to 137.5p after results showed sales and profits were flat last year, despite a pickup in fourth-quarter revenues.

US markets also opened down as concerns over Libya outweighed positive domestic sentiment and home sales data to hit technology shares.

Hewlett Packard closed down 10.22 per cent to $43.30 after cutting its 2011 revenue forecasts when it posted its first-quarter earnings last night, prompting at least six brokerages to cut their price targets on the stock.

The Dow Jones industrial average was down 111.03 points, or 0.91 per cent, at 12,101.76.

The Standard & Poor's 500 Index was down 7.98 points, or 0.61 per cent, at 1,307.46, while the Nasdaq Composite Index was down 30.28 points, or 1.10 per cent, at 2,726.14.