Protests lead to sinking of world markets

Associated Press

NEW YORK

Escalating protests in Egypt jarred world financial markets Friday. Stocks fell while the dollar, Treasurys and gold rose as investors sought to reduce their exposure to risk.

The Egyptian government’s response to widespread street protests unnerved investors. The military was deployed in an effort to quell the protests, and the headquarters of the ruling party was on fire. Thousands of people defied a curfew, and Internet and cell-phone service has been cut off.

Earlier, riot police fired tear gas and rubber bullets and used water cannons to disperse crowds that had gathered in the largest challenge to Egyptian president Hosni Mubarak’s 30-year rule. The fall of the Tunisian government two weeks ago has raised concerns that other authoritarian governments in the Middle East also could be toppled.

“The safety trade is back,” said Jeffrey Frankel, president of broker Stuart Frankel & Co. “Gold is up. Oil is up. Anything related to overseas is getting hit.”

Prices of Treasury bonds, considered one of the safest assets, rose sharply.