* Oil up on news of Libyan air strike near oil terminal
* Gold climbs to record above $1,440 an ounce
* MSCI world equity index off 0.2 pct
* U.S. stocks gain on Fed's view, bonds drop
(Updates prices, details)
By Caroline Valetkevitch
NEW YORK, March 2 (Reuters) - Brent crude oil prices rose
on Wednesday on news of an airstrike in Libya near an oil
terminal, while gold hit a record high as investors sought its
safety.
World stocks dipped, while Wall Street stocks advanced. A
Federal Reserve report saying the U.S. economy has slowly
gained strength this year helped to offset worries about oil
prices.
"The market is slowly adjusting to the new environment (of
high oil prices) and beginning to realize that there is no
short-term solution to this, that we are going to live with
this uncertainty for some time," said Robert Lutts, chief
investment officer at Cabot Money Management in Salem,
Massachusetts.
Oil prices jumped to approach 2-1/2-year highs on news
that airstrikes hit Brega about 1.2 miles (about 2 kilometers)
from a Libyan oil terminal, after Libyan leader Muammar
Gaddafi launched land and air offensives to retake territory
in Libya's eastern region.
At its intraday peak, Brent crude for April delivery
traded at $117.81 a barrel. For details, see []
Gold <XAU=> climbed to an all-time record at $1,440.10 an
ounce. The metal has rallied 10 percent since late January
when tensions first began to flare in the Middle East and
Africa.
The MSCI world equity index <.MIWD00000PUS> dipped 0.2
percent and was off about 2 percent from a 30-month peak set
in February. The index is still up about 3.5 percent since the
start of the year.
U.S. stocks rebounded from session lows, rising steadily
after the Federal Reserve's Beige Book showed the U.S. economy
was slowly gaining strength in 2011. The Fed noted that
manufacturers and retailers had been able to increase some of
their prices. []
The Dow Jones industrial average <> was up 16.27
points, or 0.13 percent, at 12,074.29. The Standard & Poor's
500 Index <.SPX> was up 2.82 points, or 0.22 percent, at
1,309.15. The Nasdaq Composite Index <> was up 12.14
points, or 0.44 percent, at 2,749.55.
DANCE OF OIL, DOLLAR AND STOCKS
Investors were nervous that political instability could
spread to major oil producer Saudi Arabia, a central U.S. ally
in the region, and other oil suppliers.
The higher oil prices, they worried, could derail the
economic recovery.
"There is an increasingly strong correlation between
equities and oil," said John Brady, senior vice president at
MF Global in Chicago.
As investors made their flight-to-safety bids, the dollar
fell to a record low against the Swiss franc. U.S. Treasury
debt prices declined.
Upbeat U.S. labor market data also buoyed stocks, helping
to offset the spikes in oil prices. []
Data showed U.S. private-sector employers added more jobs
than expected last month, which investors saw a positive sign
ahead of the more closely watched U.S. government's monthly
jobs report, due on Friday.
Equities have had a strong inverse relationship with oil
in the past several weeks on concerns that rising prices could
slow economic growth.
For a graph of equities correlation to oil, see
http://r.reuters.com/mut38r
The FTSEurofirst 300 index <> of top European shares
slid 0.7 percent to close at 1,153.73 on fears that
skyrocketing oil prices could drastically curb or halt
growth.
SAUDI ARABIA ON OUR MINDS
Forces loyal to Muammar Gaddafi launched a major offensive
against rebels in eastern Libya, sparking a rebel warning that
foreign military help might be needed to "put the nail in his
coffin" and end Gaddafi's long rule. []
Saudi Arabia's stock markets declined for a 13th session
and hit a 22-month low, while Dubai equities fell to a
6-1/2-year low, reflecting investors' worries over planned
protests in Saudi Arabia.
Saudi Arabia's benchmark stock index <.TASI> fell nearly 4
percent at one point to a fresh 22-month low.
Brent crude for April delivery <LCOc1> rose 93 cents to
settle at $116.35 a barrel on Wednesday -- the highest
settlement since August 2008.
U.S. crude for April delivery <CLc1> jumped $2.60 to
settle on Wednesday at $102.23 a barrel, the highest since
front-month crude ended at $106.89 on Sept. 26, 2008.
LOOKING TO FRIDAY'S U.S. PAYROLLS
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 21/32, its yield at 3.47 percent, up from 3.40 percent on
Tuesday. The news on U.S. private payrolls helped to
overshadow turmoil in oil-producing regions.
Economists polled by Reuters forecast Friday's nonfarm
payrolls report for February will show a rise in private-
sector payrolls of 190,000 and a rise of 185,000 in overall
nonfarm payrolls.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
INSTANTVIEW-ADP Feb payrolls rise []
ADP vs. the U.S. Labor Department:
http://r.reuters.com/gut38r
US planned layoffs:
http://r.reuters.com/fut38r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
The Swiss franc soared to a record high versus the dollar
<CHF=EBS> while the euro <EUR=EBS> climbed as high as $1.3890
on trading platform EBS, its strongest level since Nov. 9.
(Reporting and writing by Caroline Valetkevitch; Additional
reporting by Edward Krudy, Ellen Freilich, Wanfeng Zhou,
Natsuko Waki, Harpreet Bhal and Carolyn Cohn; Editing by Jan
Paschal)
