High unemployment, corrupt leaders and repressive political systems have driven unrest in the Middle East and Northern Africa in recent weeks. The initial protests in Tunisia have inspired protests in Lebanon, Yemen and Egypt as well. Unfortunately, as the protesting in Egypt intensified this past week, Hosni Mubarak, the country’s President since October 1981, decided to abolish his government, limit Internet and telecommunications services in parts of the country and close its stock exchange. Markets reacted poorly to the news with 1) the Egyptian stock index trading down almost 16% for the last week, 2) a sharp sell-off in many global equity markets on Friday and 2) concerns that Middle East oil production could be disrupted driving oil prices higher.
MY TAKE: While the problems in the Middle East are troubling (and unlikely to be resolved in the near term), the pull back in many global equity markets are likely also reacting to 1) equity markets that have experienced persistent positive gains since late August 2010; 2) disappointing earnings this week from several firms including Amazon.com Inc (AMZN), Ford Motor Co. (US: F), Johnson & Johnson (US: JNJ), Colgate Palmolive (US: CL), Procter & Gamble (US: PG), and SanDisk (US: SNDK) and 3) a US GDP report that was good, showing a 3.2% growth rate, but slightly below expectations of 3.5%.