* World stocks gain on earnings optimism
* Israel warning to Iran stokes oil, Swiss franc rally
* Sterling falls after BoE inflation report
(Updates prices, adds comment)
By Wanfeng Zhou
NEW YORK, Feb 16 (Reuters) - World stocks reached 30-month
highs on Wednesday on strong corporate earnings, while oil and the
Swiss franc rallied after Israel said a move by Iranian warships
to traverse the Suez Canal was a "provocation."
The comments by Israel's foreign minister, together with
reports of protests in Iran, Yemen and Bahrain, raised concern
Middle East tensions could disrupt oil supplies. For details, see
[] []
The MSCI world equity index <.MIWD00000PUS> rose 0.7 percent
to 345.50, after hitting its strongest since August 2008.
Brent crude futures earlier jumped to 29-month highs above
$104 a barrel <LCOc1>. U.S. crude <CLc1> for March delivery
climbed as high as $85.95 a barrel, extending gains after crude
oil and gasoline stockpiles rose less than expected last week.
"Troubles in the Middle East are back on the agenda, protests
in Bahrain and Saudi have drummed up political tension," said Rob
Montefusco, an oil trader at Sucden Financial.
Wall Street advanced after estimate-beating results from
technology bellwether Dell Inc. <DELL.O> and a flurry of deal
news.
The Dow Jones industrial average <> was last up 60.02
points, or 0.49 percent, at 12,286.55. The Standard & Poor's 500
Index <.SPX> rose 7.72 points, or 0.58 percent, to 1,335.73. The
Nasdaq Composite Index <> gained 21.14 points, or 0.76
percent, to 2,825.58.
European shares <> posted a 29-month closing high for
the third straight day, supported by strong earnings from French
bank Societe Generale <SOGN.PA> and brewer Heineken <HEIN.AS>.
The gains followed an earlier jump in Japan's Nikkei average
<> to a nine-month high. Emerging stocks <.MSCIEF> were up
0.5 percent.
"There is a growing confidence in the outlook for the global
economy. The recovery looks like it is being transformed into a
sustainable expansion and that does mean that the outlook for
earnings is very positive," said Mike Lenhoff, chief strategist at
Brewin Dolphin.
SAFE-HAVEN FRANC
The U.S. dollar fell more than 1 percent to a session low of
0.9554 Swiss franc <CHF=EBS> on trading platform EBS on tensions
between Israel and Iran. It last traded at 0.9588, down 0.8
percent. The franc is often seen as a safe-haven in times of
geopolitical turmoil.
The dollar also fell versus the euro <EUR=EBS> on the news
from Israel and traders said the dollar was being sold on the view
that this could be a security threat for Israel.
"Should there be a conflict with Israel, this would be bad for
the U.S. as well," said Brian Dolan, chief currency strategist at
Forex.com in Bedminster, New Jersey.
Douglas Borthwick, managing director at FX execution firm
Faros Trading, said the market's reaction provided further
confirmation the greenback is losing its flight to quality
status.
"The market moved into the euro rather than the U.S. dollar,
showing the euro is now the flight to quality destination," he
said.
Sterling fell <GBP=D4> after the Bank of England downgraded
its economic outlook in its quarterly inflation report, even as
consumer prices spiked higher, stoking fears of stagflation and
dampened expectations UK interest rates would rise sooner rather
than later.
"The key guidance being that any tightening ahead is likely to
prove modest with potentially only 0.50 point of tightening in
2011," said Lee Hardman, currency economist at Bank of
Tokyo-Mitsubishi UFL.
Inflationary pressures may also be building up in the United
States, a potentially troubling development for the Federal
Reserve. Data on Wednesday showed U.S. core producer prices in
January rose to their highest rate in more than two years. See
[]
(To see an analysis on market inflation expectations click on,
[])
(Additional reporting by Jessica Mortimer and Jessica Donati
in London)
(Editing by Theodore d'Afflisio)
