Good day! It's been an extremely eventful couple of weeks in the world markets thanks to a number of high tension situations unfolding. At first, our focus had been upon the Middle East. After an uprising in Tunisia changed the face of that country, Egypt soon followed. As dissenters across the region saw Mubarak ousted from power, protests grew. Libya has drawn the greatest attention in the past week, but uprisings and government interventions in Bahrain have been nearly as prominent. Now add Yemen to the mix as well.
Additionally, over the past week in particular, headlines turned to Japan, where a 9.0 (previously reported as 8.9) earthquake had an utterly devastating affect upon the country that shook the world. Subsequent tsunamis even wrecked havoc on a number of coastal communities in the western United States. Approximately 7,000 people have been confirmed dead, while about 10,000 are still missing.
Developments in both of these regions have left investors quite nervous and uncertain of what the days ahead will bring. Such uncertainty can be highly rewarding for short-term traders, but tends to make investors very nervous.
Dow Jones Industrial Average (Figure 1)
In Libya, relief initially felt following news on Friday that leader Muammar Gadhafi had agreed to an immediate cease-fire with rebel protesters was followed by the the start of military intervention by western coalitions. The French led the assault on military targets in Libya. This began on Saturday morning after reports of violent aggression against protesters by Libyan ground troops in the city of Benghazi, which has been at the center of the conflict. It's interesting to note that the U.S. has taken a back seat in this particular conflict, but has stated that it will support the decisions of its allies, which included the Arab League. Heading into the end of the week, the U.N. Security Council voted 10-0 to establish a no-fly zone over the country and authorized "all necessary measures" to protect Libya's civilian population.
In Japan, despite widespread devastation, the center of attention has been upon the damage done to the Fukushima Daiichi nuclear power plant following a tsunami caused by the quake. The plant was racked by several explosions in the days following the tsunami. Workers have struggled to contain the radiation leakage from the site and keep the reactors from overheating. Over the weekend the Japanese government reported high levels of radioactive materials in spinach and milk as far as 70 miles from the plant. The Japanese markets will be closed on Monday due to a national holiday.
After congesting on the 15 minute charts on Thursday throughout most of the day, pulling back in the afternoon, the index futures shot higher into the evening. This rally, along with another boost ahead of the open, helped the market gap strongly higher into Friday morning. The boost came on news that the finance ministers of the G7, which is comprised of the world's most industrialized nations, would intervene to stem the rising yen. The continuing rise in the Japanese currency would further slow the country's recovery efforts.