* MSCI world equity index steady just below 29-month high
* Oil rallies on Escalating Egypt violence
* European stocks, euro slip; bunds steady
By Natsuko Waki
LONDON, Feb 3 (Reuters) - World stocks fell and oil surged
above $103 a barrel on Thursday as violence in Egypt escalated,
adding to concerns about inflationary pressures which could
threaten the global economic recovery.
Supporters of President Hosni Mubarak opened fire on
protesters in Cairo's Tahrir Square on Thursday, killing at
least five, in a fresh spike in violence over an unprecedented
challenge to his 30-year-old rule. []
Global food prices measured by the U.N. Food and Agriculture
Organisation hit their highest level since records began in
1990. Rising food prices have sparked unrest in Egypt and
Tunisia are threatening to spill over to other countries.
This is also encouraging investors to cut back on risky
assets especially after world stocks hit 29-month high on
Wednesday.
Investors are also eyeing on the European Central Bank
President Jean-Claude Trichet's news conference later in the day
for clues on how the bank would combat inflation.
"Investors will be focused on the ECB meeting and want a
clear cut statement on how it plans to combat inflation," Heino
Ruland, strategist at Ruland Research in Frankfurt said.
"We have seen a lot of companies complain about rising input
costs and how these are now going to be passed onto the
customer. This is not good news and inflation needs to be
tackled."
MSCI world equity index <.MIWD00000PUS> fell around 0.15
percent but many Asian players away for the Lunar New Year
holidays. The Thomson Reuters global stock index <.TRXFLDGLPU>
was down around the same amount.
The FTSEurofirst 300 index <> fell 0.5 percent while
emerging stocks <.MSCIEF> added 0.15 percent.
U.S. crude oil <CLc1> rose 0.7 percent to $91.49 a barrel
while ICE Brent crude for March <LCOc1> rose to as high as
$103.37 a barrel, its highest since Sept. 26, 2008.
"The chance of contagion to a country that is systemically
important for oil markets still remains relatively low, but it's
the combination of that possibility and the importance of oil
flows from the Red Sea to the Mediterranean through the Suez
Canal that is building a premium (into prices)," said Ben
Westmore, commodities economist at National Australia Bank.
Fears have grown that unrest in Egypt and Tunisia would
spread to other countries in the Middle East and threaten the
region's oil exports.
And higher energy, food and other commodity prices are
fanning concerns that the resulting inflationary impact -- not
just in fast-growing emerging markets but also in developed
economies -- would squeeze corporate profits and hit the global
economic recovery.
Euro zone inflation was already at 2.4 percent in January,
moving further above the ECB's target.
JP Morgan expects a sustained 10 percent rise in oil prices
would cut global gross domestic product by 0.25 percentage
points.
The bund futures <FGBLc1> were steady ahead of Spanish debt
auctions that are expected to go smoothly. Investors are
increasingly confident that policymakers will agree a solution
to resolve the euro zone's debt crisis.
The dollar <.DXY> rose 0.1 percent against a basket of major
currencies while the euro ticked lower to $1.3786 <EUR=>, having
hit a 12-week high of $1.3862 on Wednesday.
(Editing by Toby Chopra)
