By
updated 2/11/2011 3:29:36 PM ET 2011-02-11T20:29:36

President Hosni Mubarak's resignation offered new hope for a rebound in bruised investor confidence in Egypt, with the cost of insuring the country's sovereign debt retreating sharply. Analysts and economists cautioned that other questions remained, such as the pace of reform and what role the military would play.

Friday's announcement was made by Vice President Omar Suleiman, who said Mubarak was handing control of the country over to the military. Mubarak's exit signaled an apparent end to the nearly three-week crisis, which many had feared would descend into violence and cripple the country politically and economically.

Story: 'Egypt is free,' crowds cheer after Mubarak quits

"It's a move definitely toward the right direction," said John Sfakianakis, chief economist with the Riyadh, Saudi Arabia-based Banque Saudi Fransi. "But what we still don't know is exactly the direction that we're taking or the steps to get there."

In an indication of the easing of investor angst, the country's five-year credit default swaps dropped 24 basis points to 313 basis points, according to CMA data. Meanwhile, the Market Vectors Egypt Index ETF — which allows investors to invest in Egyptian stocks — was up about 4.3 percent to $18.52. It had reached almost 6.7 percent within minutes of the resignation announcement.

But plenty of questions remained about the next steps, and whether the president's resignation would be enough to appease millions whose demands included the dismantling of his entire regime.

Wael Ziada, head of Egypt research at the Cairo-based Mideast investment bank EFG-Hermes, said the news should help "restore confidence because it means the country is approaching a more-or-less stable state."

But, he said, "We need to know how the military will be ruling the next period."

The announcement was a rare bit of good news for millions in a nation that had seen the economy grind to a standstill in the first week of the demonstrations.

As banks closed, businesses were shuttered and lawlessness broke out, tensions built over the past 18 days in an outpouring of protester vitriol directed against a man who had ruled Egypt for nearly 30 years. Banks reopened, spared a much-feared panic of investors withdrawing their money.

But the 7 percent growth rates that Egypt enjoyed for three years before the global financial meltdown struck appeared to be a wistful memory. Tourists fled in droves, and foreign investors dumped holdings. Others who had pumped hundreds of millions of dollars into ventures such as megastores Carrefour saw their stores turned to ash by firebombs after the businesses had been looted.

Egypt's image as a pillar of stability in a restive region had, to put it mildly, been marred, and it was anyone's guess how deep the repercussions would go.

Even before Suleiman's announcement, it was unclear whether the Egyptian Exchange would reopen as scheduled on Sunday after a two-week closure. The market's benchmark EGX30 index had dropped almost 17 percent in two consecutive trading sessions before it closed on Jan. 28. That prospect now appeared more likely.

Also in question was whether the Egyptian pound might endure another pummeling or whether foreign capital outflows would continue and at what pace. The Central Bank had stepped in to prop up the pound as foreigners pulled their money and others shifted deposits from the pound to the U.S. currency. It said it was ready to intervene again, if necessary, citing official foreign currency reserves of about $36 billion.

Upbeat assessment
Initial indications offered an upbeat assessment.

The Dow Jones industrial average reversed an earlier slide and was up 12 points, as European markets also drifted higher. Oil prices dropped, with the U.S. benchmark crude futures contract for March delivery dropping $1.21 to $85.52 in midday trading on the New York Mercantile Exchange. In London, Brent crude fell 31 cents at $101.13 on the ICE Futures Exchange.

The wide spread between the two benchmarks had been at least partially cemented by concerns that unrest in Egypt could affect Suez Canal traffic and spill over to other countries in the oil-rich Middle East where autocracy was the norm and popular discontent rife.

While analysts are skeptical that the same unrest could seriously threaten the Gulf Arab states where oil wealth can be funneled to appease the population, they were less certain about the prospects — at least in the short-term — in Egypt.

At stake was the pace and structure of the reform that would emerge in the coming period. In addition, whatever government that emerges from the shadows of Mubarak's regime will still be hoisting the baggage he left behind.

"It remains to be seen whether the euphoria on the streets of Cairo which greeted Mr. Mubarak's resignation is sustained through what could still be a very difficult transition period," Nomura said in a report issued Friday.

  1. Top stories: Turmoil in the Middle East
    1. UN: Gadhafi's food stocks to last just weeks
    2. S. African president: Gadhafi ready for truce
    3. Libyan rebels distribute rules on POW treatment
    4. Armed residents put up resistance to Syrian army
    5. Libyan rebels distribute rules on POW treatment

About 40 percent of Egypt's population of 80 million people lives on or below the World Bank's $2 per day poverty benchmark. Corruption is rife and Egyptians have accused Mubarak's business friends and fellow power brokers of robbing the country blind for years through the privatization process, sweetheart business deals, cut-rate prices for state lands and other kickbacks that came with the trappings of power.

Also to be reckoned with was a swollen deficit, a wide income gap, a bloated public service sector, week-old promises of a 15 percent pay and pension increases for its workers and retirees, unemployment unofficially pegged as high as 25 percent and even higher among the under-30 age group that makes up at least 40 percent of the population.

Compounding the litany of woes was the beating the tourism sector could take in the wake of the protests. Foreigners had fled the country in droves as the protests unfolded and it remained unclear whether they would be willing to risk returning soon to a country where the military was ostensibly in control.

Then, there remained the perennial political concern: the Muslim Brotherhood — the largest and best organized opposition movement in the country. While the group renounced violence long ago, it is still viewed with concern by many in the West who fear it aims to turn Egypt into a draconian Islamic state.

"The biggest question that remains unanswered is what will happen to the opposition and the role of the Muslim Brotherhood," said Sfakianakis.

"If we go into free elections, the Muslim Brotherhood will, for certain, play a major role in determining whether the investor community sees Egypt as a value proposition or a selling off proposition," he said.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Video: 'Egypt is free': Mubarak gives up office

Photos: Farewell Friday

loading photos...
  1. Anti-government protesters celebrate inside Tahrir Square after the announcement of Egyptian President Hosni Mubarak's resignation in Cairo on Feb. 11. (Dylan Martinez / Reuters) Back to slideshow navigation
  2. Egyptians set off fireworks as they celebrate in Cairo’s Tahrir Square after President Mubarak resigned and handed power to the military. (Khalil Hamra / AP) Back to slideshow navigation
  3. President Barack Obama makes a statement on the resignation of Egypt's President Hosni Mubarak in the Grand Foyer at the White House in Washington D.C. (Carolyn Kaster / AP) Back to slideshow navigation
  4. Egyptians celebrate in Tahrir Square after President Hosni Mubarak resigned and handed power to the military on Friday. Egypt exploded with joy, tears, and relief after pro-democracy protesters brought down President Hosni Mubarak with a momentous march on his palaces and state TV. Mubarak, who until the end seemed unable to grasp the depth of resentment over his three decades of authoritarian rule, finally resigned Friday. (Khalil Hamra / AP) Back to slideshow navigation
  5. Protesters walk over a barricade after it was taken down to allow free entry to hundreds of thousands of Egyptians in Tahrir Square in Cairo February 11, 2011. A furious wave of protest finally swept Egypt's President Hosni Mubarak from power, sending a warning to autocrats across the Arab world and beyond. (Yannis Behrakis / Reuters) Back to slideshow navigation
  6. A spokesman for Egypt's higher military council reads a statement titled “Communiqué No. 3” in this video still on Friday. Egypt's higher military council said it would announce measures for a transitional phase after President Hosni Mubarak stepped down. (Reuters Tv / Reuters) Back to slideshow navigation
  7. Egyptian celebrates in Cairo after the announcement of President Mubarak's resignation. (Amr Abdallah Dalsh / Reuters) Back to slideshow navigation
  8. Protesters celebrate inside Tahrir Square after the announcement of Mubarak's resignation in Cairo on Friday. A furious wave of protest finally swept Mubarak from power after 30 years of one-man rule, sparking jubilation in the streets. (Amr Abdallah Dalsh / Reuters) Back to slideshow navigation
  9. An Egyptian reacts in the street after President Hosni Mubarak resigned and handed power to the military in Cairo, Egypt, on Friday, Feb. 11. (Amr Nabil / AP) Back to slideshow navigation
  10. Thousands of Egyptian anti-government protesters celebrate inside Tahrir Square after the announcement of Egyptian President Hosni Mubarak's resignation on Friday. (Amr Abdallah Dalsh / Reuters) Back to slideshow navigation
  11. Egyptian soldiers celebrate with anti-government protesters in Tahrir Square on Friday. Cairo's streets exploded in joy when Mubarak stepped down after three-decades of autocratic rule and handed power to a junta of senior military commanders. (Marco Longari / AFP - Getty Images) Back to slideshow navigation
  12. Anti-government protesters celebrate inside Tahrir Square after the announcement of Egyptian President Hosni Mubarak's resignation in Cairo on Friday. (Dylan Martinez / Reuters) Back to slideshow navigation
  13. Egyptians celebrate the news of Mubarak's resignation in Tahrir Square on Friday. (Tara Todras-whitehill / AP) Back to slideshow navigation
  14. An Egyptian woman cries as she celebrates the news of the resignation of President Hosni Mubarak, who handed control of the country to the military, Friday night, in Tahrir Square, Cairo. (Tara Todras-whitehill / AP) Back to slideshow navigation
  15. Egyptian anti-government protesters celebrate minutes after the announcement on television of the resignation of President Hosni Mubarak, in Cairo's Tahrir Square on Friday. Vice President Omar Suleiman announced that Egyptian President Hosni Mubarak had resigned. (Khaled Elfiqi / EPA) Back to slideshow navigation
  16. Opposition protesters celebrate Egypt's President Hosni Mubarak's resignation, in Tahrir Square on Friday. President Mubarak bowed to pressure from the street and resigned, handing power to the army. (Suhaib Salem / Reuters) Back to slideshow navigation
  17. Anti-government protesters celebrate inside Tahrir Square after the announcement of Mubarak's resignation in Cairo on Friday. (Dylan Martinez / Reuters) Back to slideshow navigation
  18. On Egyptian state television, Al-Masriya, Egyptian Vice President Omar Suleiman delivers an address announcing that Egyptian President Hosni Mubarak has stepped down, in Cairo on Friday. (TV via AFP - Getty Images) Back to slideshow navigation
  1. Editor's note:
    This image contains graphic content that some viewers may find disturbing.

    Click to view the image, or use the buttons above to navigate away.

  2. Editor's note:
    This image contains graphic content that some viewers may find disturbing.

    Click to view the image, or use the buttons above to navigate away.

  3. Editor's note:
    This image contains graphic content that some viewers may find disturbing.

    Click to view the image, or use the buttons above to navigate away.

  4. Editor's note:
    This image contains graphic content that some viewers may find disturbing.

    Click to view the image, or use the buttons above to navigate away.

  1. Image: Anti-government protesters celebrate inside Tahrir Square after the announcement of Egyptian President Hosni Mubarak's resignation in Cairo
    Dylan Martinez / Reuters
    Above: Slideshow (18) Egypt's Mubarak steps down - Farewell Friday
  2. Image: Protester in Tahrir Square
    Emilio Morenatti / AP
    Slideshow (61) Egypt's Mubarak steps down - Week 3
  3. Image: Egyptian anti-Mubarak protesters
    Amr Nabil / AP
    Slideshow (93) Egypt's Mubarak steps down - Week 2
  4. Image: Mohamed ElBaradei
    Khalil Hamra / AP
    Slideshow (83) Egypt's Mubarak steps down - Week 1
  5. Image:
    Mayra Beltran / AP
    Slideshow (17) Egypt's Mubarak steps down - World reacts

Discuss:

Discussion comments

,

Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments

Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 1.97%
$30K home equity loan FICO 5.80%
$75K home equity loan FICO 4.54%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 13.70%
13.70%
Cash Back Cards 17.91%
17.91%
Rewards Cards 17.17%
17.17%
Source: Bankrate.com