* Oil hits 2-1/2 year high on Libya violence
* Shares contained by price fears, earnings disappointments
* Euro zone manufacturing upbeat
By Jeremy Gaunt, European Investment Correspondent
LONDON, Feb 21 (Reuters) - Oil prices charged to a fresh
2-1/2 year high on Monday as traders eyed increasing violence in
major producer Libya, feeding fears about rising inflation and
restraining gains in equities.
Global stocks were slightly higher with emerging markets
down and European shares flat. U.S. markets were closed for a
national holiday.
Protests broke out in the Libyan capital Tripoli for the
first time following days of unrest in the city of Benghazi and
some army units defected to the opposition in what has become
one of the bloodiest revolts to convulse the Arab world.
Financial markets are particularly sensitive to the violence
in Libya because it exports around 1.1 million barrels per day
of crude.
Brent oil <LCOc1> was up $1.90 a barrel at $104.44 having
earlier risen to a new high of $104.60.
"There is uncertainty about supplies. Markets don't like
uncertainty," said Bernard McAlinden investment strategist at
NCB Stockbrokers.
Rising oil prices, meanwhile, feed into inflation, one of
the main current concerns of investors, who are in a generally
bullish mood on expectations that the global economic recovery
is now sustainable.
One result was to weaken equities. MSCI's emerging market
benchmark <.MSCIEF> was down 0.1 percent on the day.
The FTSEurofirst 300 <> was flat, off its opening lows
after euro zone manufacturing data came in above consensus. Ifo
sentiment data out of Germany was also above forecast.
European stocks, however, have been hit by mixed earnings.
Thomson Reuters Proprietary Research reported on Monday that the
number of European companies missing fourth quarter expectations
is outpacing those beating them.
The earnings growth rate, actual and predicted, for the
STOXX 600 is 18.9 percent, compared with a December estimate of
36.1 percent.
Brewer Carlsberg <CARLb.CO>, for example, fell on Monday
after posting a surprise fall in fourth-quarter operating
profit.
STRONG EURO
The euro was firm, having hit its highest level in more than
10 days against a background of hawkish comments from European
Central Bank officials that added to expectations a rise in
interest rates is on the way this year.
The common currency was trading at $1.3705 <EUR=>, up 0.1
percent on the day. It rose to $1.3727 earlier in the session,
the highest since Feb. 10, extending a rise on Friday that was
also related to comments from an ECB Executive Board member.
With an upcoming Irish election on Friday likely to see a
party which is openly calling for a renegotiation of its EU
bailout agreement come to power, strategists say there is a risk
that the euro could come under pressure.
Euro zone policymakers are also struggling toward a more
comprehensive package that they hope can put an end to debt
troubles.
"With neither the core nor the periphery signalling
willingness to find a compromise on the issues for now, the
chances are that potential political impasses could erode euro
sentiment going forward," said Valentin Marinov, strategist at
Citi FX.
Core euro zone bond yields were lower as investors boght
caution in the face of the Middle East and North Africa events.
(Additional reporting by Harpreet Bahl and Anirban Nag; editing
by Patrick Graham)
