GLOBAL MARKETS-Oil, gold hit records, stocks fall on Libya

                                
  
                                
 * Oil hits 2-1/2-year high, pulls back on Gaddafi rumor
                                
 * Gold hits record peak, silver at 31-year high on Libya
                                
 * U.S., European stocks turn lower on rising oil prices
 (Updates with oil pulling back from highs, U.S. stocks
falling)
                                
 By Walter Brandimarte
                                
 NEW YORK, March 7 (Reuters) - Crude oil prices jumped to a
2-1/2-year peak and gold hit an all-time high on Monday as
investors worried that widening unrest in Libya could spread to
other oil-producing nations in the Middle East.
                                
 Rumors that Libyan leader Muammar Gaddafi was seeking a
deal with rebels caused oil to erase some gains. But U.S. crude
prices remained more than 1 percent higher, trading around $105
a barrel.
                                
 The increase in the price of oil weighed on both European
and U.S. stocks, with technology shares on Wall Street also hit
by a downgrade on the semiconductor industry by Wells Fargo.
                                
 The euro fell against the dollar after having earlier hit a
four-month high as expectations of a euro zone interest rate
hike next month faded.
                                
 U.S. crude oil futures <CLc1> jumped to as high as $106.95
per barrel, the highest level since September 2008, as
Gaddafi's counter-offensive against rebels deepened concerns
that Africa's largest holder of oil reserves is headed for
civil war. Prices were still 1.08 percent higher at $105.55
after rumors that the Libyan leader was trying to secure a safe
exit from the country merely curbed initial gains.
                                
 "The major risk remains the prospect of the political
unrest spreading to the Gulf-producing region," said Caroline
Bain, economist at the Economist Intelligence Unit. "However,
even if there is civil unrest in Saudi Arabia, it is not a
given that oil production will be affected."
                                
 The prospects of further unrest in oil-rich Middle Eastern
countries drove investors to seek safe-haven assets. Gold spot
prices <XAU=> hit a record high of $1,444.40 an ounce while
silver <XAG=> rose as high as $36.52 an ounce, its highest
since early 1980.
                                
 "If we do see tension escalating further, then we could
witness a new high in gold," said Ong Yi Ling, investment
analyst at Phillip Futures in Singapore.
                                
 The Dow Jones industrial average <.DJI> fell 37.58 points,
or 0.31 percent, to 12,132.30, while the Standard & Poor's 500
Index <.SPX> lost 7.13 points, or 0.54 percent, at 1,314.02.
The Nasdaq Composite Index <.IXIC> was down 37.63 points, or
1.35 percent, at 2,747.04.
                                
 The semiconductor index <.SOX> shed 3.1 percent after Wells
Fargo downgraded the chip industry to "market weight" from
"overweight," saying the sector will grow moderately in 2011
compared with the past two years.
                                
 In Europe, the FTSEurofirst 300 index <.FTEU3> of top
shares declined 0.26 percent.
                                
 MOODY'S DOWNGRADES GREECE
                                
 Risk premium on Greek, Portuguese and Spanish debt rose
after Moody's cut Greece's credit rating by three notches
                                
 Refinancing costs paid by peripheral euro-zone countries
were on the rise after Moody's slashed the rating of Greece by
three notches, signaling more downgrades in the near future.
[ID:nLDE7260EL]
                                
 Portuguese 10-year yields <PT10YT=TWEB> rose to a euro
lifetime high of 7.65 percent, up around 9 basis points on the
day.
                                
 U.S. Treasury prices fell on Monday, even as oil prices
continued to rise, with investors viewing Friday's rally as
overdone as they prepared for $66 billion in new Treasury
supply to hit markets this week.
                                
 Ten-year note yields, for example, may need to rise by 7 to
10 basis points to generate interest if no safety bid emerges,
said Thomas Roth, executive director in U.S. government bond
trading at Mitsubishi UFJ Securities in New York.
                                
 The Treasury will sell $32 billion in new three-year notes
on Tuesday and $21 billion and $13 billion in reopenings of
10-year notes and 30-year bonds on Wednesday and Thursday. 
                                
 Benchmark 10-year notes <US10YT=RR> fell 10/32 in price on
Monday with yields rising to 3.54 percent, up from 3.49 percent
late on Friday.
                                
 The euro <EUR=EBS> was last little changed at at $1.3992
falling from an earlier fresh four-month high of $1.4036 on
electronic trading platform EBS.
 (Additional reporting by Rodrigo Campos, Jan Harvey, Harpreet
Bhal and Jessica Mortimer, Editing by Leslie Adler)