* European stocks rise on bargain-hunting but gains limited
* Gold near record peak, silver at 31-year high
* Euro shrugs off Greece ratings cut, supported by rate view
By Emelia Sithole-Matarise
LONDON, March 7 (Reuters) - Crude oil prices jumped to a
2-1/2-year peak on Monday as worries about supply disruption
increased due to widening clashes in Libya though European
stocks rose as investors picked up bargains after recent falls.
Unrest in the oil-rich Middle East stoked demand for
precious metals, with gold -- often sought in times of
geopolitical tensions -- rising close to a lifetime high at
$1,434.82 an ounce, while silver surged to a 31-year peak.
Risk premia on Greek, Portuguese and Spanish debt also rose
after Moody's cut Greece's credit rating by three notches, but
the euro shrugged off the move to hit a four-month high against
the dollar on expectations the European Central Bank may raise
interest rates next month. []
U.S. crude oil futures <CLc1> jumped 2 percent, topping
$106.60, their highest price in 30 months as a counter-offensive
by Libya's Muammar Gaddafi against rebels deepened concern that
Africa's largest holder of oil reserves is headed for civil war.
[]
U.S. crude is up by more than a fifth in the last two weeks.
European stocks shrugged off falls in Asian markets, with
the pan-European FTSEurofirst 300 index <> rising 0.5
percent as investors bought beaten-down stocks after two weeks
of losses.
U.S. stock index futures also rose, indicating Wall Street
will rebound from Friday's falls. []
Further gains were, however, limited as investors fret that
a prolonged period of high oil prices could stifle economic
growth and erode corporate profits, while adding to inflationary
pressures.
"There was a pretty aggressive selloff towards the last
couple of hours of trading on Friday and we have seen investors
come in and buy from the lows (but) as long as you have crude
prices as high as they are that's going to limit further gains
for equities," said Joshua Raymond, market strategist at City
Index.
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Graphic on oil and equities correlation:
http://r.reuters.com/mut38r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ German government bonds, the euro zone benchmark, failed to
gain much traction from underperforming lower-rated bonds after
the Moody's move. Analysts said last week's aggressively hawkish
ECB stance made some investors more sensitive to the risk of
inflationary prices from high oil prices.
Yields were up across the German curve, with 10-year Bund
yields last up two basis point at 3.305 percent <DE10YT=TWEB>.
"The ECB sees it as an upside risk on inflation so some in
the market see it as more of an inflation risk than a risk to
growth," said Niels From, chief analyst at Nordea. "We would
have to have a more dramatic rise in oil prices for growth to be
a concern."
In currencies, the euro <EUR=> rose to a four-month high of
$1.4029 after breaking above resistance at $1.40 on Friday on
the view that the ECB will tighten monetary policy before the
Federal Reserve.
"Sentiment is bullish at the moment and we could see a test
of the 1.4080/00 area," said Richard Wiltshire, chief foreign
exchange dealer at ETX Capital.
"The euro will stay bid on any dips ahead of April's rate
announcement. I would assume they can't change their rhetoric,
and we have seen a growing number of ECB officials talking about
rate hikes sooner rather than later".
(Additonal reporting by Harpreet Bhal and Jesscia Mortimer;
Editing by Toby Chopra)
