KARACHI - The Karachi Stock Exchange came under severe selling pressure on Friday as foreign investors preferred to sell stocks during the earning announcements session caused by massive fall in the global capital markets due to rising political unrest in Middle East and Libya. Political uncertainty in the country as governments alliance with PML-N broke in Punjab was another the major reason of decline in the shares value. The benchmark KSE-100 index sharply dropped 315.74 points to 11,223.52. The index sowed a decline of 2.74 per cent over the last closing as the index had closed higher at 11,539.26 points mark on Thursday. Market volume improved to 156.84 million shares while capitalization stood at Rs 3,037.41 or $35.57 billion. Total trading value accounted for Rs 5.84 billion or $68.39 million, according to the trading statistics of KSE issued on Thursday. The KSE-30 index closed lower at 10,756.83 level, down 2.77 per cent with the loss of 306.17 points. KSE future volume came at 8.42 million shares and its value was at Rs797.88 million with 10.79 per cent spread. Rising political uncertainty as government alliance with PML-N broke in Punjab affected the sentiment. Investors remained cautious throughout the trading session on concerns for rising fiscal deficit and political reservation for rising local PoL prices despite Brent crude cross $120 yesterday, said Ahsan Mehanti, Director Arif Habib Investments Limited. Bears were in total control right from the word go, the syndicate of participants, operating from both local and off-shore accounts stayed the major sellers, along with the participants those were joined by fresh float to address margin calls, thus painting the board red, said another analyst. He said the sell-off that started from post result price erosion due to below expectations earnings and payout announcements by main board stocks, those made justification of the attained levels tough, turned in a major tsunami, day end short covering and corporate accumulation at lower locks however reduced some losses. However, strength will continue to invite fresh float in the main board and high priced stocks, caution was therefore visible. According to the analyst, equity stock funds came in for placement in high dividend yielding stocks, while the others preferred to stay liquid and opted for currency hedge. Since the desired risk adjusted rate of return have certainly increased only few listed stocks are likely to qualify the stringent litmus test, of sustaining growth and dividend flows option are certainly limited for both corporate and retail participants, thus keeping the stance highly cautious. Reuters from London adds: Global stocks recovered their poise Friday following the previous days sharp drop in oil prices on speculation that Saudi Arabia would be willing to make up for any shortfall in crude production from Libya. The catalyst to Thursdays decline in oil prices was the expectation that Saudi Arabia, the worlds biggest crude exporter, could pump more oil out to make up for lost supplies from Libya, which is effectively split into two after a popular uprising. In normal circumstances, Libya produces about 1.6 million barrels of crude per day, but its output has been heavily impacted by the violence that has caused nearly 300 deaths, according to a partial count by Human Rights Watch. In London, a barrel of Brent crude was up 76 cents at $112.14 a barrel, still $7 below its high point on Thursday. Meanwhile, the equivalent New York rate was up 37 cents at $97.65 a barrel, again around $5 down from the previous days peak. The knock-on effect on stocks has been positive as investors breathe a sigh of relief that the recent sharp rise in oil prices has come to a halt, however briefly the fear is that sky-high oil prices will choke the fragile economic recovery around the world. In Europe, Germanys DAX was up 0.6 percent at 7,169 while the CAC-40 in Paris rose 1.2 percent to 4,055. Britains FTSE 100 index of leading British shares was up only 0.2 percent at 5,934.39 though trading was halted soon after the opening after another technical glitch. Wall Street was poised for a fairly solid opening, too Dow futures were up 61 points at 12,098 while the broader Standard & Poors 500 futures rose 7.7 points to 1,310.40. Libya was likely to continue to dominate sentiment as the trading week comes to a nervous end. With reports indicating an escalation in the violence in and around the capital city of Tripoli, now that large parts of the country are in the control of opposition groups, there are fears that longtime leader Moammar Gadhafi may be preparing for a final and bloody showdown. This year the longtime leaders of Tunisia and Egypt have already had to quit following massive popular uprisings. The biggest worry in the markets is not Libya but whether the crisis spreads through the Persian Gulfs bigger energy producers. Already Bahrains government is facing daily protests and there are fears that Saudi Arabias royal family may be next in line to face the wrath of its people. The announcement of a massive $36 billion package of benefits earlier this week was seen as an attempt by King Abdullah to ease popular discontent. If the political unrest was to spread to the worlds largest oil producer, markets would have to discuss the possibility of a new oil crisis and its consequences for the global economy, said Ashley Davies, an analyst at Commerzbank. If the crisis spreads there, experts say oil prices could reach $200 a barrel, potentially tipping the world economy back into recession. The fragility of the global recovery was evidenced by the fact that Britain contracted by a greater than anticipated 0.6 percent in the final three months of 2010. Though the heavy snow in December was the main reason behind the contraction, the figures underlined how vulnerable the economy could be to even higher energy prices and interest rates. The news that the contraction was greater than the initial 0.5 percent estimate hit the pound, sending the currency 0.4 percent lower against the dollar, while the euro rose 0.2 percent to 0.8574 pound. Elsewhere, the euro was 0.2 percent lower at $1.3783 and the dollar 0.1 percent down at 81.87 yen. In Asia, Japans Nikkei 225 stock average rose 0.7 percent to close at 10,526.76 and South Koreas Kospi also added 0.7 percent, to 1,963.43. Hong Kongs Hang Seng index jumped 1.8 percent to 23,012.37. The benchmark Shanghai Composite Index was virtually unchanged at 2,878.57, and down 0.7 percent for the week, while the Shenzhen Composite Index edged up less than 0.1 percent to 1,280.30 in lackluster trading.