March 9, 2011 / 1:14 AM / in 7 years

Brent oil jumps on Libya, denting world stocks

NEW YORK (Reuters) - Brent oil prices jumped on Wednesday, weighing on global stocks, as escalating violence in Libya increased fears that higher energy costs could choke the global economic recovery.

U.S. Treasuries prices rose on a safety bid following the sale of Portuguese debt at unsustainably high yields. Appetite for safe-haven assets also drove strong demand in an auction of 10-year Treasuries.

Mining stocks led European equities lower as prices of key base metals fell on concerns about economic growth as oil prices rose. Wall Street was also pressured by a disappointing profit outlook from chip maker Texas Instruments, but a jump in IBM shares supported the Dow.

Nikkei futures traded in Chicago were little changed at 10,565.00, showing investors’ lack of conviction in a market direction.

Brent oil jumped 2.55 percent to $115.94 a barrel as fighting in Libya intensified and OPEC saw no need for an emergency meeting to consider raising output. Worries that the unrest could spread further in 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 closed lower, after seesawing between gains and losses, as investors eyed a greater-than-expected rise in U.S. stockpiles last week. Oil in New York fell 0.61 percent to settle at $104.38 a barrel.

World stocks edged lower, with the MSCI All-Country World Index .MIWD00000PUS down 0.1 percent at 343.21 points.

On Wall Street, the Dow was cushioned by IBM (IBM.N), which jumped 2.2 percent to $165.86. The tech giant’s shares hit an all-time high one day after it stuck to its promise to nearly double profits by 2015.

Gas prices are displayed at a petrol kiosk in Dal Mar, California March 1, 2011. world's largest oil exporter. REUTERS/Mike Blake

A weaker-than-expected earnings target by Texas Instruments TXN.N weighed on the Nasdaq, however. Shares of the chip maker fell 3.1 percent.

The Dow Jones industrial average .DJI dipped 1.29 points, or 0.01 percent, to 12,213.09, while the Standard & Poor's 500 Index .SPX slipped 1.80 points, or 0.14 percent, to 1,320.02. The Nasdaq Composite Index .IXIC fell 14.05 points, or 0.51 percent, to 2,751.72.

In Europe, the FTSEurofirst 300 .FTEU3 index of top shares closed down 0.23 percent.


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

    U.S. benchmark 10-year Treasury notes gained 21/32 in price, with the yield at 3.4675 percent. Prices rose further after the high yield in an auction of $21 billion of reopened 10-year notes came in below market expectations.

    Portugal was able to sell 1 billion euros in two-year bonds at an auction but its borrowing cost 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 March 25 summit coming up, we’ve got continued selling in Greece.”

    Euro zone leaders are expected to agree on Friday on the next steps in their year-long effort to quell the region’s debt crisis, but the summit is unlikely to produce a breakthrough.

    The euro fell from an earlier high to trade flat against the dollar as expectations of a euro-zone interest rate hike next month faded and investors focused on the region’s debt problems.

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

    The euro was unchanged at $1.3903, falling from an earlier four-month high of $1.4036 hit on electronic trading platform EBS.

    Copper for three-months delivery 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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