* Crude oil falls, Goldman Sachs advises taking profits
* US stocks off; Alcoa to report after market's close
* Rate rise expectations send Bund yield above 3.5 pct
* US dollar firmer after US government shutdown avoided
(Adds details, comment, updates prices)
By Wanfeng Zhou
NEW YORK, April 11 (Reuters) - Crude oil prices fell
sharply on Monday on concerns that recent high prices could
erode demand and threaten economic recovery, while the U.S.
dollar firmed slightly after the U.S. federal government
averted a shutdown late Friday.
Brent and U.S. crude oil prices fell early when the African
Union said Libyan leader Muammar Gaddafi had accepted a road
map to end the civil war, including an immediate ceasefire,
though rebels said any settlement would require Gaddafi step
down. []
But analysts were skeptical about the peace deal, and even
if an end to the civil war were in sight, it will be some time
before Libyan exports return to pre-conflict levels.
Investment bank Goldman Sachs told clients there is a
strong chance commodity prices may reverse, recommending they
take profits. []
Brent crude oil for May <LCOc1> fell $2.93 to $123.72 a
barrel, dropping as low as $123.62 after reaching a 32-month
peak of $127.02. U.S. crude <CLc1> fell $2.87 to settle at
$109.92, pulling back after reaching an early $113.46 peak, the
highest intraday price since September 2008.
The U.S. dollar firmed against the euro after the U.S.
Congress on Friday reached a last-minute federal budget deal
that avoided a government shutdown, though traders said the
focus on the U.S. debt ceiling debate could limit any gains.
A rebound in the dollar was also overdue after it fell
sharly against the euro on Friday continuing its downtrend of
the past four months. For the month of April, the dollar was
still down about 2.0 percent.
On Monday the euro <EUR=> fell 0.3 percent to $1.4435,
after hitting a 15-month high around $1.4486 on Friday.
"The euro's drop today is nothing more than white noise and
the pullback should prove shallow," said Jessica Hoversen,
foreign exchange and fixed income analyst at MF Global in New
York.
Hoversen said the dollar's negative tone should remain in
place as long as the U.S. Federal Reserve keeps interest rates
low and while central banks abroad, namely the European Central
Bank and Bank of England, move closer to more normal borrowing
costs.
Expectations of another rise in European Central Bank
interest rates by July kept the euro close to recent highs and
pushed euro zone government bond prices lower. German Bund
yields <DE10YT=TWEB> briefly rose above 3.5 percent for the
first time since August 2009.
The yen was off an 11-month low against the euro and a
2-1/2-year trough versus the Australian dollar as another
earthquake in Japan led some investors to close riskier bets
funded by cheap borrowing in the Japanese currency.
U.S. STOCKS LOWER FOR THIRD DAY
U.S. stocks ended lower for a third day, with investors
nervously awaiting quarterly earnings to see if last year's
profit growth will continue in the face of rising raw material
costs.
Aluminum maker Alcoa <AA.N> will mark the unofficial start
of the U.S. quarterly earnings reporting season when it reports
results late Monday. Profits in the first quarter of 2011 at
S&P 500 companies are seen rising 11.4 percent from a year ago,
according to Thomson Reuters data. For details, see
[]
"There's a question of whether companies can meet the
fairly optimistic expectations," said John Carey, portfolio
manager at Pioneer Investment Management in Boston, which has
about $260 billion in assets under management. "There's
potential for disappointment, but if they come in line or
above, the market could experience a continued rally."
The Dow Jones industrial average <> ended up 1.06
points at 12,381.11 but but the benchmark Standard & Poor's 500
Index <.SPX> fell 3.76 points, or 0.28 percent to 1,324.41. The
Nasdaq Composite Index <> lost 8.91 points, or 0.32
percent to 2,771.51.
World stocks as measured by MSCI <.MIWD00000PUS> were down
0.3 percent, with emerging markets <.MSCIEF> off 0.6 percent.
European stocks fell, with the FTSEurofirst 300 <> index
of top European shares down 0.2 percent.
Although the world economy is fairly robust, investors
increasingly expect higher commodity prices to drive up
inflation, prompting central banks to tighten monetary policy.
The International Monetary Fund said on Monday it did not
believe that rising commodity prices will derail the global
economic recovery but warned that inflation will remain
elevated for a while.
(Additional reporting by Ryan Vlastelica, Julie Haviv and
Gertrude Chavez-Dreyfuss, Gene Ramos and Robert Gibbons;)
