Johannesburg — INVESTOR jitters over the threat of a swine flu pandemic wreaked havoc on world markets yesterday, with the JSE all share index giving up 1,91% after being dragged down by a sell-off in resources stocks.

Oil, gold and copper prices fell after the World Health Organisation (WHO) raised its alert to the highest level since the warning system was adopted in 2005, and said the disease could not be contained.

The index of the JSE's top 20 resource shares fell 4,69%. Brent crude for June delivery fell 1,7% to $49,44 a barrel.

Rand strength also depressed stock prices, with the currency quoted at R8,6685/$. Gold traded at $891,20/oz in New York.

The WHO said the spread of the virus was in a "turning period", and urged governments to plan for mass outbreaks.

The organisation raised the warning level to phase 4, which means sustained human-to-human infection.

So far, 153 people have died and nearly 2000 are infected. Infections are in Mexico, Israel, the US, Canada, Spain and the UK. All the deaths were in Mexico.

Airlines were warned yesterday that the outbreak would cause a steep fall in traffic. Their share prices were hit by fear that events could mirror the 2003 Sars (severe acute respiratory syndrome) crisis.

Geoffrey Yu, an analyst at Swiss bank UBS, said: "Exposed industries such as airlines and hotel operators have borne the brunt of the equity sell-off, but if fears escalate into wider global growth concerns, broad-based declines in global indices are possible."

Imara SP Reid analyst Warrick Lucas said: "Commodities are priced on marginal demand, and are much more sensitive to risks on global demand (caused by the swine flu outbreak). "The future could swing two ways, in that if you believe the market has been too bearish on the swine flu outbreak there may be a moderate rebound in the markets to come in the short term."

However, if the worst fears were realised, "the situation looks bad".

Share prices on the JSE were also "playing catch-up" from weak global markets yesterday.

The markets were also to a lesser extent influenced by questions about the liquidity of Citibank and Bank of America after stress tests on US banks by the US government, said Sasha Naryshkine of the Vestact stock brokerage.

Naryshkine said resources stocks were sensitive to changes in sentiment on global growth prospects. Concern about swine flu had temporarily dampened that outlook, he said.

The 8,9% rally in commodity prices that began last month was under threat.

But the US stock market opened higher last night, and the lower resource share prices might be viewed as a buying opportunity for some investors if the US market stabilised overnight, said Naryshkine.

"Markets are doing what they tend to do, taking fright," said Howard Wheeldon, strategist at BGC Partners in London.

"But in my view, it's totally unnecessary."

In London, the Dow Jones Stoxx 600 index fell 1,5%, after rebounding 23% since March 9 on optimism that government plans to fix the banking system would help the global economy out of recession. The FTSE 100 and France's CAC 40 indices lost 1,7%, and Germany's DAX lost 1,9%.

In New York, US stocks fluctuated as a bigger than expected drop in consumer confidence and a slowdown in house prices offset concerns about banks requiring more capital and about swine flu.

The S&P 500 index rose less than 0,1% in mid-morning trade in the US after slipping 1,2% at the opening, while the Dow Jones industrial average was 0,2% higher at that time. With Bloomberg