* Oil soars on Libya unrest, hitting airline stocks
* Gold jumps as safe haven before falling back
* Korean construction stocks hit by Libya
* U.S. Treasuries, JGB futures jump
By Nick Macfie
SINGAPORE, Feb 22 (Reuters) - Oil prices jumped and Asia
stock prices fell on Tuesday as investors took fright at the
unfolding crisis in Libya and turned to safe havens such as
government bonds and gold, pushing the precious metal briefly to
a seven-week high.
U.S. crude futures hit a 2-1/2 year high on concern
that violence in Libya could cut more of the OPEC-member's
output and that a similar story could play out in other top oil
producers in North Africa and the Middle East.
Brent crude for April delivery rose $1.42 cents to
$107.16 a barrel by 0451 GMT, after rising as high as $108.18 in
early trade. On Monday, Brent hit a 2-1/2 year high of $108.70.
"The market is very nervous over news of violence in Libya,"
said Yinxi Yu, a commodities analyst with Barclays Capital.
Japan's Nikkei 225 index closed down 1.8 percent and
the MSCI's index of Asia Pacific shares outside Japan
was also off about 1.8 percent .
Airline stocks tumbled across the region on the
back of rising oil prices. Korean Air Line Co Ltd
led losers, dropping more than 9 percent. Hong Kong's Cathay
Pacific Airways Ltd fell more than 4 percent to a
six-month low.
Major South Korean builders also slid as they put their
Libya construction projects on hold. Hyundai E&C shares tumbled
more than 9 percent, while Daewoo Engineering & Construction
fell 6.3 percent.
Moody's Investors Service changed the outlook on Japan's Aa2
sovereign rating to negative from stable, warning that
government policies may not be enough to rein in public debt.
"The market is not reacting much to the decision," said
Takeshi Shibasaki, chief financial analyst at Mizuho Securities.
"Standard and Poor's has already cut Japan's rating, and
separately there already were expectations among participants
that Moody's would do something."
Gold, a traditional refuge in times of tumult, extended
gains and rose to its highest in seven weeks, lifting silver to
its strongest level since 1980.
Spot gold rose $3.75 to $1,409.70 an ounce, but soon
drifted back into negative territory. Silver jumped above
$34 an ounce, its highest since 1980, before also falling back
to around $33.33.
MOUNTING REVOLT
European stocks lost more than 1 percent on Monday on a
combination of fears over Libya, where Muammar Gaddafi faced a
mounting revolt against his 41-year rule, signs of imminent
interest rate rises and more evidence of a poor earnings season.
U.S. markets were closed Monday for a holiday but U.S. stock
futures were sharply lower, suggesting Wall Street will
likely fall when they reopen on Tuesday.
"There are a lot of people in the marketplace waiting to get
in at better levels," said Todd Martin, Asia equity strategist
with Societe Generale in Hong Kong.
"Could we be in for a mid-cycle correction? Absolutely, but
from what we are seeing -- loose monetary policy and
improvements in Europe -- I don't see outrageously overconfident
market participants yet. We are in the middle of a bull market.
We are getting a proper correction here but long-only money will
be buying into this," he said.
In Asia, Martin recommended clients shifting more into
equity markets in Japan, Korea and Taiwan, all of which he said
were attractively valued.
The dollar climbed 0.5 percent against a basket of major
currencies to 78.107 on the Libya violence.
One of the sharpest moves was in the New Zealand dollar,
which slid 1.5 percent to $0.7523 after a strong quake
hit New Zealand's second-biggest city of Christchurch.
Libyan forces loyal to Gaddafi, the world's
second-longest-serving leader after the Sultan of Brunei, have
fought an increasingly bloody battle to keep him in power with
residents reporting gunfire in parts of the capital Tripoli and
one political activist saying warplanes had bombed the city.
Security forces had killed dozens of protesters across the
country, human rights groups and witnesses said, prompting
widespread condemnation from world leaders.
U.S. Treasuries jumped in Asia, with the yield on the
10-year benchmark falling 7 basis points to 3.515 percent, and
Japanese government bonds also rose, with 10-year futures
up more than half a point.
The Christchurch quake killed at least 65 people, the
country's prime minister said. New Zealand's benchmark NZX 50
index was down 0.67 percent.
(Additional reporting by Lewa Pardomuan in Singapore, Osamu
Tsukimori in Tokyo, Ian Chua in Sydney, Kevin Plumberg in Hong
Kong and John Gurr in Wellington; Editing by Alex Richardson)
