* Stocks fall 0.7 pct on Mideast tensions, high oil prices
* Markets fret about longer term impact on growth
* P/E indicators show MSCI APXJ fairly valued
* U.S. Treasuries, precious metals gain
By Saikat Chatterjee
HONG KONG, March 7 (Reuters) - Crude oil prices rose to
2-1/2 year highs on Monday on heightened worries about supply
disruption due to deepening unrest in Libya, while Asian stocks
slipped as concerns about the Middle East and higher energy
prices weighed on equities.
Asian markets have see-sawed following volatile oil prices
in recent weeks, but the MSCI ex-Japan index is
barely a percent away from a 2-1/2 year peak tested in January,
indicating markets have been largely resilient to the Libyan
crisis.
Still, investors are worried that a prolonged period of high
oil prices could stifle economic growth and erode corporate
profits, while adding to inflationary pressures in emerging
economies.
On Monday, the MSCI ex-Japan index was down more than half a
percent.
U.S. crude oil futures jumped 1.6 percent, topping
$106, to the highest price in 2-1/2 years on Monday as a
counter-offensive by Libya's Muammar Gaddafi against rebels
deepened concerns that a civil war is brewing in Africa's
largest holder of oil reserves.
ICE Brent crude for April was trading at $117.28 a
barrel, up 1.1 percent.
"The concern is that with what we are seeing in Libya, it's
purely fear driving the market," said Jonathan Barratt, managing
director at Commodity Broking Services in Sydney.
"Each time the price moves up a little, people are forced
into the market. Once it's feeding itself, it will continue to
rise," Barratt said, adding $120 may be the peak without further
supply disruptions.
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Oil price shocks http://r.reuters.com/qes28r
Middle East unrest http://r.reuters.com/nym77r
For a graphic of equities' correlation to oil, see:
http://r.reuters.com/mut38r
A SNAP ANALYSIS ON U.S. jobs data:
For a graphic on gold prices: http://r.reuters.com/baw38r
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A reasonably strong batch of U.S. data on Friday that showed
the jobless rate falling to a near two-year low failed to boost
sentiment, as investors remained firmly focused on the
developments in the Middle East and the resulting longer-term
impact on oil. .
U.S. crude is up by more than a fifth in the last two weeks.
The spike in oil combined with soaring food prices present
fresh problems for central banks in Thailand, Malaysia, South
Korea and New Zealand who head for policy meetings this week.
The region is a big importer of oil and market players are
worried that sharp increases in prices would stifle growth and
fuel inflationary pressures.
FAIRLY VALUED?
The MSCI APXJ index is trading at 12.7 times forward
12-month earnings, at par with its long-term average, I/B/E/S
data showed -- indicating that markets are now fairly valued.
"Higher oil prices are a key factor weighing on investor
sentiment. Heavier energy costs have numerous negative
implications for a manufacturing-focused energy importer like
South Korea," said Y.S. Rhoo, a market analyst at Hyundai
Securities.
Tokyo's Nikkei average , Australia's S&P/ASX 200
index and South Korea's KOSPI fell more than one
percent each, tracking a weaker Wall Street close.
Wall Street erased most of its weekly gains on Friday, with
the S&P 500 Index falling by 0.74 percent, as fears of
more geopolitical turmoil overshadowed positive U.S. data.
The CBOE Volatility Index , Wall Street's fear gauge,
rose slightly to 19.11 but stayed well below a May peak of 48.
Rising tensions in the Middle East also stoked demand for
precious metals and government bonds.
Gold , often sought in times of geopolitical
tensions, rose to near a lifetime high at $1,434.60 an ounce,
while silver surged 3 percent to 31-year highs as investors
piled into safe havens. Gold hit a record $1,440 last week.
Treasury debt prices stabilised after Friday's gains with
benchmark ten year notes at 3.49 percent, a shade
above a one-month low of 3.39 percent hit earlier this month.
In currencies, the dollar struggled against a basket of
major currencies after failing to get a big boost from
the U.S. data, while the euro was supported on
expectations of an interest rate hike next month from a hawkish
European Central Bank.
The kiwi dollar held above a one-year low versus
the euro and a five-month low against the dollar but is set to
stay pressured ahead of an expected interest rate cut this week.
(Additional reporting by Ian Chua in SYDNEY, Alejandro Barbajosa
in SINGAPORE and Antoni Slodkowski in TOKYO)
* For Reuters Global Investing Blog, click on
http://blogs.reuters.com/globalinvesting
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http://blogs.reuters.com/macroscope
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http://blogs.reuters.com/hedgehub
(Edited by Ramya Venugopal)
