European markets fall on Libya unrest

European Indices fell between 0.3% and 1.2% on Monday as early gains quickly reversed on escalating violence and protests in Libya.

Traders hate uncertainty and whilst they appeared to digest the continuing unrest in the Middle East with ease last week, the escalation in both violence and unrest in Libya over the weekend and this morning has convinced traders to flee risky asset classes and seek defensive safe havens. As such, traditional defensive stocks such as pharmaceuticals and tobacco are higher whilst riskier investment classes such as heavyweight banks and miners are lower, dragging EU indices with them. Banks rallied over 2% last week with strong gains in both Royal Bank of Scotland and Lloyds ahead of their earnings on Thursday and Friday respectively so traders have been happy to bank profits here today.

The unrest in the Middle East has triggered some large gains today in the price of Crude Oil, with Nymex Crude Oil rallying over 3.5% as traders fear supplies could be disrupted by the protests.

Sunday media reports that Invensys could be a target of a bidder war from several international firms including Siemens and CSR has triggered strong buyer interest in the company’s shares this morning. Shares have rallied 4% to the top of the FTSE leader board and whilst the firm has been heralded as a potential bid target by investors for some time, the weekend’s report have given hope to a bidding war and this has energised traders this morning.

On the downside, we have seen shares of Ocado fall 6.5% after Waitrose announced over the weekend that it has invested some £10 million into a new home delivery website that it hopes to launch in March. The investment by Waitrose is seen as a direct threat to Ocado’s business, which sells mostly Waitrose goods, and as such traders have sold out of Ocado’s shares this morning fearing that the firm could lose a significant proportion of its market share.

There is a lack of economic data out this afternoon and with US trading closed for President’s Day, traders have had a lack of drivers to help supplement buyer demand today. This could also be a factor playing in the bearish move this morning for indices across Europe.