NEW YORK (Reuters) - Global stocks rallied on Friday after a week-long sell-off but oil prices edged higher even after Saudi Arabia boosted oil output to calm fears of supply disruptions sparked by the uprising in Libya.
The Swiss franc headed for its biggest two-week advance against the dollar in eight months and looked set to extend gains as lingering fears of contagion from unrest in Libya continued to drive investors to safe-haven assets.
“The situation remains fluid. Everything still is up in the air,” said Mary Nicola, currency strategist at BNP Paribas in New York. “As long as it persists, the Swiss franc should benefit.”
The dollar fell 4.6 percent against the Swiss franc over the past two weeks after touching a record low of 0.9229 on trading platform EBS before paring some losses.
Gold and bond prices also gained, reflecting concerns that violence could spill over to other oil-producing countries in the Middle East and stall the global economic recovery.
Oil came off Thursday’s peak of almost $120 a barrel for Brent futures, a level last seen in 2008, but a late bout of buying to cover short positions lifted prices for the day.
“I don’t think many traders are comfortable being short over the weekend,” said Tom Bentz, a broker at Paribas Commodity Futures in New York.
Brent crude futures settled up 78 cents at $112.14, while U.S. light sweet crude settled up 60 cents at $97.88.
Saudi Arabia raised production about 8 percent to above 9 million barrels per day to make up for a near halt in Libyan exports, an industry source said, helping prices fall from peaks earlier in the week.
The Saudi move bolstered optimism over data showing U.S. consumer sentiment rose to its highest level in three years in February. The news offset a report that showed the U.S. economy grew slower than initially estimated in the fourth quarter.
The U.S. dollar rebounded against the euro but gold prices rose toward $1,410 an ounce, posting a fourth straight week of gains, as soaring oil prices stoked inflation worries.
The euro was down 0.37 percent at $1.3752, while spot gold prices rose $7.79 to $1,407.50 an ounce.
U.S. gold futures for April delivery settled down $6.50 an ounce at $1,409.30.
Consumer sentiment rose to 77.5, up from 74.2 in January, and the highest since January 2008, according to the Thomson Reuters/University of Michigan survey.
Gross domestic product was revised lower to an annualized rate of 2.8 percent from an initial 3.2 percent estimate.
The potential spillover of unrest to other oil-producing counties remained a concern, with trading in oil futures volatile, considering outages in Libya have risen as high as three-quarters of its 1.6 million barrels per day output.
Muammar Gaddafi vowed to “crush any enemy” on Friday, addressing a crowd of supporters in Tripoli as Libya’s popular uprising closed in around him. A string of other towns were reported to have fallen to the opposition.
Still, investors took comfort in Saudi efforts to cover any supply gaps.
“Fears that the unrest in Libya could turn into a civil war and wipe out its oil production have been offset by assurances from Saudi Arabia that it is raising output,” said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.
Major stock markets around the world rallied after sharp sell-off earlier in the week that still left the benchmark S&P 500 index off 1.7 percent by week’s end.
Analysts have been calling for a correction in stocks following a six-month rally. Much weaker-than-average volume on Friday cast doubt on the ability for stocks to move higher.
The Dow Jones industrial average .DJI closed up 61.95 points, or 0.51 percent, at 12,130.45. The Standard & Poor's 500 Index .SPX gained 13.78 points, or 1.06 percent, at 1,319.88. The Nasdaq Composite Index .IXIC rose 43.15 points, or 1.58 percent, at 2,781.05.
World equities as measured by MSCI’s all-country world index .MIWD00000PUS gained 1.1 percent.
U.S. Treasury debt prices rose as turmoil in North Africa and worries over the economic impact of higher oil prices kept a safe-haven bid for government debt alive.
The benchmark 10-year U.S. Treasury note was up 8/32 in price to yield 3.42 percent. (To read Reuters Global Investing Blog click here; for the MacroScope Blog click on blogs.reuters.com/macroscope; for Hedge Fund Blog click on blogs.reuters.com/hedgehub)
Reporting by Caroline Valetkevitch, Gene Ramos, Wanfeng Zhou, Karen Brettell and Frank Tang in New York; Writing by Herbert Lash; Editing by Andrew Hay