(Recasts with U.S. markets, adds byline; dateline previous
LONDON)
By Herbert Lash
NEW YORK, March 3 (Reuters) - Oil and gold charged to new
highs on Monday as investors sought safety from a crumbling
dollar and soft equity markets as weak U.S. economic data and
inflation worries keep money flowing to commodities.
Crude oil prices set new records in New York and London,
and gold edged closer to $1,000 an ounce, setting a record high
for the fourth straight day.
Treasury bond prices extended losses and the dollar pared
losses against the euro and the yen after a slightly
firmer-than-expected U.S. manufacturing report.
European shares closed down for a fourth day and U.S.
stocks traded little changed after midday as data did little to
dispel concern over the potential for a U.S. recession.
"From an oil perspective, this rally like that across the
commodity sector remains rampant as fund investors and
speculators continue to seek safer havens from an ailing equity
market," said Robert Laughlin, an analyst at broker MF Global.
Crude speculators on the New York Mercantile Exchange have
increased their net long positions to the highest in seven
weeks, according to data from the Commodity Futures Trading
Commission released last week.
U.S. pared early losses as a new high in oil prices
prompted investors to snatch up shares in the energy sector.
Financial shares weakened as mortgage banker Thornburg <TMA.N>
said it is suffering cash shortages and some speculated it may
need a bankruptcy action. Thornburg's woes reminded investors
of the continuing fallout from a global credit crunch.
The Dow Jones industrial average <> was down 36.31
points, or 0.30 percent, at 12,230.08.
Banks drove European shares lower, dragged down by British
mortgage lender HBOS <HBOS.L>, with the bank sector index
<.SX7P> off 1.65 percent. HSBC <HBSA.L> shares fell more than 1
percent before rising on last year's 10 percent profit gain.
The FTSEurofirst 300 index <> of major European
companies closed down 1.36 percent at 1,297.43, while MSCI's
main world equity index <.MIWD00000PUS> fell 1.07 percent to
hit a one-week low.
Earlier, Japanese stocks fell more than 4 percent, with the
Nikkei hitting a nearly six-week closing low as exporters, such
as Honda Motor Corp <7267.T>, were battered by a strong yen
amid growing U.S. recession worries.
Hong Kong stocks, which tracked losses in overseas
equities, also fell over U.S. economic weakness.
The benchmark Nikkei <> shed 610.84 points to end at
12,992.18, while the benchmark Hang Seng Index <> in Hong
Kong ended down 3.07 percent at 23,584.97.
Economic data did not play a big role. U.S. manufacturing
data showed factory activity contracted last month, although
not by as much as feared, which helped both U.S. and European
equities recoup some losses.
The Institute for Supply Management's index of national
factory activity fell to 48.3 in February from 50.7 in January,
slightly above economists' expectations for a reading of 48.0.
"The market is absolutely desperate to gauge exactly how
quickly the U.S. economy is slowing down and what is the
potential threat of inflation," said Henk Potts, a strategist
at Barclays Stock Brokers in London.
Expectations the Organization of Petroleum Exporting
Countries will not change oil output when it meets this week in
Vienna underpinned the oil market.
A recent fall in the U.S. dollar to record lows against
euro <.DXY> has helped draw investment into oil and other
commodities, and geopolitical tensions kept bullish momentum
intact.
Crude oil is priced in U.S. dollars so when the U.S.
currency declines oil prices often rise to reflect that.
The market drew support as oil producer Venezuela and
Ecuador sent troops to their borders with Colombia after it
bombed rebels inside Ecuador.
On the New York Mercantile Exchange, April crude <CLJ8> was
up 1.5 percent at $103.39 a barrel, after a reaching a new
record $103.95.
The dollar rebounded from lifetime lows against the euro
and a basket major currencies as investors took profits on
relief the ISM data was not as bad as expected.
The U.S. Treasury market fell on the ISM report and was also
unsettled by remarks from Philadelphia Federal Reserve Bank
President Charles Plosser suggesting that the Fed should be
ready to raise rates when financial conditions stabilize.
Gold, which has gained about 18 percent so far this year,
rose closer to the $1,000 mark. Investors are shifting some of
their money into the precious metal amid expectations of more
U.S. interest rate cuts, volatile stock markets and fears of
rising energy costs.
Silver jumped above $20 an ounce for the first time since
November 1980, while platinum and palladium held near highs.
Spot gold <XAU=> jumped as high as $989.30 an ounce and was
quoted at 983.70/984.50 at 1530 GMT, up from $973.30/973.75 in
New York late on Friday.
"As long as the dollar remains under pressure, I would
expect that gold prices would continue to rise."
said Michael Widmer, a metals analyst at Lehman Brothers.
At midday, the euro traded flat at $1.5192, helping to
pull back the New York Board of Trade's dollar index <.DXY>
from a historic low of 73.354.
(Reporting by Caroline Valetkevitch, John Parry and Lucia
Mutikani in New York and Amanda Cooper, Jane Merriman and
Daniel Magnowski in London)
(Writing by Herbert Lash)
