Stocks fall as Libya drives oil, gold higher

By Walter Brandimarte

NEW YORK | Mon Mar 7, 2011 5:08pm EST

NEW YORK (Reuters) – Global stocks fell on Monday as the growing violence in Libya and worries about other Middle Eastern countries drove prices of oil and gold higher, raising concerns about the global economic recovery.

Oil jumped to a 2-1/2-year peak while gold hit a record high as fighting escalated around one of Libya’s key oil ports. Prices of both retreated later on talk that Libyan leader Muammar Gaddafi was trying to negotiate his exit from the country.

Also weighing on U.S. stocks was a Wells Fargo downgrade of the semiconductor sector, which has been leading a rally on Wall Street since the beginning of September. Asian stocks looked set to open lower, with Nikkei futures traded in Chicago falling 1.9 percent to 10,450.00 points.

The euro was little changed against the dollar, after reaching a four-month high against the U.S. currency, as expectations of an interest rate hike by the European central bank faded. Resurging debt concerns triggered by a Moody’s downgrade of Greece also weighed on the European currency.

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Oil Falls a Second Day on OPEC Supply Speculation, Rising U.S. Stockpiles

From Bloomberg

Oil dropped for a second day in New York as speculation mounted that OPEC will consider boosting output to compensate for disruptions in Libya and rising U.S. supplies signaled weakening demand.

Futures slid as much as 0.8 percent after U.S. crude inventories climbed the most since November, according to American Petroleum Institute data. Angola’s oil minister said the Organization of Petroleum Exporting Countries should wait to see how events in Libya unfold before calling an emergency meeting about prices and production. Kuwait’s oil minister yesterday said members of the group are weighing an “urgent” meeting to determine whether more output is needed.

“I think the situation in Libya to some degree is contained from an oil-price point of view,” said Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne. “There is also a lot of supply in the market, it’s not tight.”

Crude for April delivery decreased as much as 81 cents to $104.21 a barrel in electronic trading on the New York Mercantile Exchange, and was at $104.30 at 3:39 p.m. Singapore time. Yesterday, the contract lost 42 cents from the previous settlement of $105.44, the highest since Sept. 26, 2008. Prices are up 28 percent from a year ago.

Brent oil for April settlement slipped 41 cents, or 0.4 percent, to $112.65 a barrel on the London-based ICE Futures Europe exchange. The contract jumped 3.4 percent last week, its sixth weekly increase. Read more of this post