* Oil hits 2-1/2-year high, pulls back on Gaddafi rumor
* Gold hits record peak, silver at 31-year high on Libya
* US, European stocks fall on rising oil prices
(Updates with closing oil prices)
By Walter Brandimarte
NEW YORK, March 7 (Reuters) - Global stocks fell on Monday
as widening unrest in Libya and other Middle Eastern countries
drove prices of oil and gold higher, raising concerns about the
global economic recovery.
Oil jumped to a 2-1/2-year peak while gold hit a record
high as fighting escalated around one of Libya's key ports.
Both retreated later on talk that Libyan leader Muammar Gaddafi
was trying to negotiate his exit from the country.
Also weighing on U.S. stocks was a Wells Fargo downgrade of
the semiconductor sector, which has been leading a rally on
Wall Street since the beginning of September.
The euro was slightly weaker against the dollar as
expectations of an interest rate hike by the European central
bank faded. Resurging debt concerns triggered by a Moody's
downgrade of Greece also weighed on the European currency.
Brent crude oil futures <LCOc1> had jumped to $118.50 per
barrel, the highest since September 2008, before finishing 0.8
percent lower, at $115.04 per barrel, as investors also took
the opportunity to pocket some profits.
U.S. crude futures <CLc1>, however, closed up 0.98 percent
at $105.44 a barrel after reaching an intraday high of
$106.95.
"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. Spot gold
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.
Both retreated along with oil prices in the afternoon, but
investors cautioned against further rises in the next few
days.
"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.
On Wall Street, technology shares led losses 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. For details, see
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The Dow Jones industrial average <> was down 79.85
points, or 0.66 percent, at 12,090.03. The Standard & Poor's
500 Index <.SPX> was down 11.01 points, or 0.83 percent, at
1,310.14. The Nasdaq Composite Index <> was down 39.04
points, or 1.40 percent, at 2,745.63.
In Europe, the FTSEurofirst 300 index <> of top
shares closed 0.41 percent lower.
"There are still problems in Libya and there are concerns
the oil price might curb economic recovery, " said Heino
Ruland, strategist at Ruland Research in Frankfurt. "I think
investors will continue to reduce exposure to their risk
profile."
PORTUGUESE YIELDS AT RECORD HIGH
Refinancing costs paid by peripheral euro-zone countries
were on the rise after Moody's slashed its rating on Greece by
three notches, signaling more downgrades in the near future.
[]
Portuguese 10-year yields <PT10YT=TWEB> rose to a euro
lifetime high of 7.65 percent, also pushed higher by a
government debt sale later this week.
The euro <EUR=EBS> was 0.06 percent lower at $1.3976,
falling from an earlier four-month high of $1.4036 on
electronic trading platform EBS.
The European single currency had been strengthening since
ECB President Jean-Claude Trichet surprised investors last week
by saying that euro-zone interest rates may rise as early as
next month.
(Additional reporting by Rodrigo Campos, Chris Reese, Nick
Olivari; Editing by Dan Grebler)
