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* Gaza fighting pushes oil up, boosts energy shares
* US stocks off as Kuwait scraps venture with Dow Chemical
* Europe, Japan stocks end up, dollar rebounds, gold gains
By Daniel Bases
NEW YORK, Dec 29 (Reuters) - Violence in the Middle East
drove up the price of oil on Monday on worries about threats to
crude supplies and fueled a bid for safe-haven government
debt.
U.S. stocks fell as Kuwait's decision to scrap a $17.4
billion joint venture with Dow Chemical highlighted fears about
the global economy, even as the higher oil prices drove up
energy shares.
"What stocks are grappling with is discounting how long,
how deep of a recession this is going to be and when the sun is
going to go up again," said Kevin Kruszenski, head of listed
trading at KeyBanc Capital Markets in Cleveland.
"That clearly drove the decision," he added, of Kuwait's
decision to cancel the Dow Chemical deal.
Bargain hunting helped pull the dollar up from its earlier
lows. Thin holiday conditions exaggerated price movements.
European stocks closed higher on advances in energy and
banks, while Japanese stocks gained after reports of a
potential merger of three insurance companies.
Concerns that the violence in the Middle East, as Israeli
warplanes pounded the Hamas-ruled Gaza Strip for a third
consecutive day on Monday, might impact oil supplies sent U.S.
light sweet crude oil <CLc1> up $2.31, or 6.13 percent, to
settle at $40.02 per barrel..
"Most commentary blames the conflict in Gaza between Hamas
and Israel," Mike Fitzpatrick, vice president at MF Global,
said in a report. "Certainly, oil prices remain sensitive to
geopolitical developments, ... but the declining dollar, low
volume and the return of bargain hunting Europeans are probably
more to blame."
A weaker U.S. dollar contributed to buying of oil and gold
in Asia and European trading hours. But bargain hunting and the
break of a key support level spurred dollar buying.
"When we hit $1.40, that sort of opened the floodgates.
It's all basically technical in nature and nothing
fundamental," said Brian Dolan, chief currency strategist, at
Forex.com in Bedminster, New Jersey.
The dollar rose against a basket of major trading-partner
currencies, with the U.S. Dollar Index <.DXY> up 0.39 percent
at 81.286 from a previous session close of 80.970.
The euro <EUR=> fell 0.65 percent at $1.397. Against the
Japanese yen the dollar <JPY=> lost 0.10 percent at 90.60.
After shedding more than 2 percent of its value against the
Swiss franc, the dollar recouped some of its losses to be down
0.84 percent at 1.0585 francs <CHF=>.
Sterling, however, fell 1.37 percent against the U.S.
dollar to $1.4446 <GBP=>. The British pound also fell to a
record low against the euro of 97.99 pence <EURGBP=>, as it
approached parity for the first time since the euro was
launched in 1999.
The slide in the pound came after reports pointed to a
further slide in UK home prices in 2009. (For more, click on
[]).
GLOBAL STOCKS MIXED
In U.S. stocks, Kuwait's decision to end a petrochemical
joint venture with Dow Chemical <DOW.N> heightened worries
about the global economy as Kuwait cited falling petrochemical
sales and the global financial crisis. The decision also
ignited worries that Dow, the largest U.S. chemical company,
would not be able to complete its planned purchase of rival
Rohm & Haas <ROH.N>.
The Dow Jones industrial average <> fell 31.62 points,
or 0.37 percent, at 8,483.93. The Standard & Poor's 500 Index
<.SPX> lost 3.38 points, or 0.39 percent, at 869.42. The Nasdaq
Composite Index <> declined 19.92 points, or 1.30 percent,
at 1,510.32.
Dow Chemical's stock plunged 19.0 percent to $15.32 while
Rohm & Haas tumbled 16.1 percent to $53.34.
Energy companies gained with the higher oil prices.
Chevron <CVX.N> rose 1.7 percent to $71.55 while Exxon
Mobil <XOM.N> gained 1.1 percent to $78.02.
In Europe, gains in energy shares helped the FTSEurofirst
300 <> index of top European shares closed up 0.83
percent to 810.37.
BP <BP.L>, gas producer BG Group <BG.L> and Tullow Oil
<TLW.L> added between 3.6 and 3.4 percent.
European banking and pharmaceutical shares also rose.
Earlier in Japan, the Nikkei average ended up 0.1 percent,
helped by news that three non-life insurers including Mitsui
Sumitomo Insurance Group Holdings were in talks to merge.
U.S. Treasuries were broadly higher. The benchmark 10-year
U.S. Treasury rose 10/32 of a point in price, pushing the yield
down to 2.09 percent. That is not far above a 50-year nadir of
2.04 percent reached on Dec. 18 <US10YT=RR>.
"The escalation of violence in the Middle East has added to
the safe-haven bid tone in Treasuries," said Kim Rupert,
managing director of global fixed income analysis at Action
Economics LLC in San Francisco.
On euro zone government bond markets, the interest
rate-sensitive two-year Schatz yield plumbed another record low
of 1.710 percent <EU2YT=RR>. Lond-dated Japanese government
bond yields touched five-year lows.
Spot gold prices <XAU=> rose $9.95, or 1.15 percent, to
$877.60
(Additional reporting by Jeremy Guant, Ian Chua, Rebekah
Curtis in London and Vivianne Rodrigues, Leah Schnurr, Chuck
Mikolajczak in New York)
