Today is heavy on news and action, and in particular the news coming from the Middle East bear indications that the turmoil and chaos of the past weeks will stretch into the indefinite future, as the region tries to find its course after years of stagnation and despotism. Markets are responding in a predictable fashion, but so far the intensity of the action is not as intense as they would be if the full scope of the turmoil were to be taken into consideration.

In Libya, Muammar al-Gaddafi himself appeared on TV addressing his supporters, mentioning the contributions of his grandparents to the country, and reaffirming that he will not leave Libya, but will prefer to die on its soil as a martyr to his nation. His son, for his part, gave the good news of rivers of blood if the demonstrators didn‘t back down. Since Gaddafi is not fighting Christians, external forces or colonial invaders, some may wonder exactly whose martyr he plans to be. The most cynical would perhaps consider an association with the Old Enemy of mankind himself...

Reports of gunfights, bombings, helicopter raids, and many other manners of attacks and assaults by government forces against the protestors are coupled with news about the country`s own diplomats calling for a no-fly zone over the airspace, speaking of genocide and massacres committed by the government against its own people. 

By contrast, few people were impressed by the Moody`s announcement that the outlook for Japan`s sovereign debt rating would be placed on negative watch. It is not too much to regard the Japanese public sector as a big zombie surviving solely on the life force sucked through the arteries of the global financial system. The latest squabbles in the nation`s diet over the necessary measures to control and bring down the budget deficit appear to have been the trigger for the Moody`s decision, but it is only significant from the point of view of a historian and his chronology of the debt crisis, if anything at all. 

Today, global equities are down by a greater margin than yesterday, partly in consequence of corrective sales, and partly in respose to inflation worries as oil rises above $90. Gold is similarly holding above $1400, but it is far from certain that the last few days` jump can be maintained into the spring and summer months. Assuming that Saudi Arabia and Iran are spared the fate of Libya and Egypt, one would expect Chinese interest rate rises to restrain commodity price appreciation in the next few months. However, we don`t think much can be said with any degree of certainty on this issue, given how deeply entrenched the dictatorial regimes have been, and how little the revolutionaries know about replacing the existing structure in their countries.