GLOBAL MARKETS-Brent oil climbs on Libya fears; US Treasuries up

Wed Mar 9, 2011 12:54pm EST

* Brent jumps over 2 pct on Libya, lack of OPEC action

* Portugal sells bonds, long-term financing worries remain

* European stocks close down, IBM shares support Dow (Updates with European markets close, Dow Jones rising)

By Walter Brandimarte

NEW YORK, March 9 (Reuters) - Brent oil prices jumped on Wednesday as violence threatened Libya's oil infrastructure, driving world equities lower on fears over the impact to the economic recovery.

U.S. Treasuries prices were boosted by a safety bid following the sale of Portuguese debt at unsustainable high yields.

In European equities, mining stocks were among the biggest losers as prices of key base metals fell on worries that demand for raw materials could be hit if economic growth slowed.

On Wall Street, however, the Dow Jones clawed back into positive territory with a jump in IBM shares on its outlook for a near-doubling in earnings by 2015.

Brent oil LCOc1 jumped more than 2 percent to $115.50 a barrel as fighting in Libya intensified and OPEC saw no need for an emergency meeting to consider raising oil output. Worries that the unrest could spread into the Middle East also left investors jittery.

"It's a fear trade," said Michael Hewson, an analyst at CMC Markets. "It's about the fear of these troubles escalating -- there is some concern about how the Saudi Day of Rage will go on Friday."

Activists in Saudi Arabia have set up Facebook pages calling for protests on March 11 and 20.

Expectations that the Organization of the Petroleum Exporting Countries would respond to the decline in Libya's output by rising production had driven oil prices lower on Tuesday, one day after they hit a 2-1/2-year high.

In New York, however, U.S. crude oil futures CLc1 seesawed between gains and losses as investors eyed both the violence in Libya and a greater-than-expected rise in U.S. stockpiles last week. Oil in New York was little changed at $104.95 a barrel.

World stocks fell, with the MSCI world equity index .MIWD00000PUS down 0.12 percent at 343.19 points and the Thomson Reuters global stock index .TRXFLDGLPU off 0.03 percent at 133.23 points.

European equities fell on the fears that rising oil prices could hurt the economy and fan inflation. The FTSEurofirst 300 .FTEU3 index of top European shares closed down 0.23 percent at 1,144.75 points, after rising to a high of 1,153.62 during the session.

On Wall Street the Dow Jones inched higher as IBM (IBM.N) shares soared 2.8 percent, to $166.86. A number of analysts raised their target price for the tech giant's stock after the company reaffirmed its 2015 profit target on Tuesday. [ID:nL3E7E92DN]

The Dow Jones industrial average .DJI gained 23.16 points, or 0.19 percent, to 12,237.54, while the Standard & Poor's 500 Index .SPX was down 0.22 points, or 0.02 percent, at 1,321.60. The Nasdaq Composite Index .IXIC fell 9.25 points, or 0.33 percent, to 2,756.52.

PORTUGAL IN NEED

Prices of U.S. government bonds rose as investors moved to safe-haven assets after an auction of Portuguese debt reminded them of the financial troubles of peripheral euro zone countries.

Benchmark 10-year U.S. Treasury notes US10YT=RR rose 3/32 in price, with the yield at 3.5346 percent.

Portugal was able to sell 1 billion euros in two-year bonds at an auction, but its cost of borrowing was the highest since it joined the euro. Lisbon said such yields were unsustainable in the long run without Europe-wide action.

"The auction was always going to go OK ... but I don't think clients are particularly interested in buying the bond," said a trader in London. "The problems remain -- we've got the the March 25 summit coming up, we've got continued selling in Greece."

Euro zone leaders meet ahead of the summit on Friday. The bloc's 17 heads of state are expected to agree the next cautious steps in their year-long effort to quell the region's debt crisis but the meeting is unlikely to produce a breakthrough. [ID:nLDE7270VF]

The euro fell from an earlier high and traded practically flat against the dollar as expectations of a euro-zone interest rate hike next month faded somewhat.

Investors worry that a monetary policy tightening by the European Central Bank would raise borrowing costs even higher for peripheral euro zone economies.

The European single currency EUR= was practically unchanged at $1.3903, falling from an earlier four-month high of $1.4036 on electronic trading platform EBS.

Gold was little as investors booked profits, erasing earlier gains driven by the unrest across North Africa and the Middle East and the renewed worries over euro zone debt.

Spot gold XAU= eased 0.1 percent to $1,425.70 an ounce by 11:37 a.m. EST (1637 GMT). U.S. gold futures for April delivery GCJ1 lost $1.80 an ounce to $1,425.40.

Copper fell 3 percent as the strengthening crude oil prices kept investors worried that inflationary pressures could hit economic growth and demand for industrial metals.

Copper for three-months delivery CMCU3 on the London Metal Exchange closed at $9,275 a tonne, down from a close of $9,530 a tonne on Tuesday. (Additional reporting by Kirsten Donovan, Karen Brettell, Edward Krudy, Claire Milhench; Editing by Leslie Adler)

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