* Stocks supported by telecom sector, overseas fears weigh
* Euro gains on expectations ECB will raise interest rates
* Brent oil flat as rebels advance on oil towns in Libya
(Updates with Treasuries prices erasing gains after auction)
By Walter Brandimarte
NEW YORK, March 28 (Reuters) - The euro rose on Monday on
expectations of higher euro-zone interest rates while world
stocks eked out gains as concerns about Middle East and Japan
cast a cloud despite positive economic data.
The euro rose above $1.41 after the president of the
European Central Bank, Jean-Claude Trichet, said inflation
rates are above the bank's price stability target, adding to
expectations that interest rates could go higher as early as
next month.
The European currency erased most of its gains later,
however, as the defeat of German Chancellor Angela Merkel's
party in a key state election raised fears that she will have
less leeway to financially support debt-stricken members of the
euro zone.
Data showing that U.S. consumer spending rose for an eighth
straight month rise supported equities.
U.S. consumer spending rose slightly more than forecast as
households tapped their savings to cover higher food and energy
prices, while inflation accelerated at its fastest pace since
June 2009. []
Lingering worries about unrest the Middle East and Japan's
nuclear disaster kept a lid on gains.
"It puts a cap on things for right now, at least until we
start to see some earnings come out early in April. That might
finally give us a little more upside, assuming that we have
good earnings," said Janna Sampson, co-chief investment officer
at OakBrook Investments LLC in Lisle, Illinois.
"At some point people have got to price in Japan's problems
and the problems in the Middle East that we know about."
The operator of Japan's crippled nuclear plant on Monday
said that highly radioactive water has leaked from a reactor.
For details, see [].
An upgrade of the U.S. telecommunication sector by
brokerage Robert W. Baird also supported Wall Street stocks.
[].
The Dow Jones industrial average <> rose 14.11 points,
or 0.12 percent, to 12,234.70, while the Standard & Poor's 500
Index <.SPX> gained 0.90 points, or 0.07 percent, to 1,314.70.
The Nasdaq Composite Index <> was nearly flat at 2,742.66.
Shares of AT&T Inc <T.N> gained 2.3 percent, while Verizon
Communications Inc <VZ.N> rose 1.1 percent after Robert W.
Baird upgraded them, saying AT&T's deal to buy T-Mobile would
help stabilize the hyper-competitive industry.
In Europe, the FTSEurofirst 300 <> index of top
shares closed 0.07 percent higher, also supported by technology
stocks. Trading was slow, with volume reaching only 60 percent
of the 90-day average.
The MSCI All-Country World Index <.MIWD00000PUS> down 0.18
percent.
Brent crude oil <LCOc1> was 0.54 percent lower at $114.98 a
barrel as rebels regained control of key oil towns in Libya.
[]
U.S. Treasuries yields rose after an auction of two-year
notes, the first in three weeks, indicated higher yields may be
needed to attract biggers on this week's five-year and
seven-year note sales.
A $35 billion sale of two-year notes <US2YT=RR> priced one
basis point wider than where the notes had traded ahead of the
sale, though bidding by indirect bidders was relatively strong
at around 33 percent.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 2/32 in price, with the yield rising to 3.4462 percent.
The dollar was down against a basket of trading-partner
currencies, with the U.S. Dollar Index <.DXY> off 0.06 percent.
The euro <EUR=> was up 0.05 percent at $1.4088.
(Reporting by Chuck Mikolajczak, Julie Haviv and Karen
Brettell in New York; Editing by Leslie Adler)
