* MSCI world equity index dips from recent 29-month high
* Oil rallies on escalating Egypt violence
* European stocks, euro fall; Bunds steady
By Natsuko Waki
LONDON, Feb 3 (Reuters) - World stocks fell and oil surged
above $103 a barrel on Thursday as unrest in Egypt escalated,
adding to concerns about inflationary pressures that could
threaten the global economic recovery.
Gunmen fired on anti-government protesters in Cairo, where
fighting killed six and wounded over 800 on Thursday in a fresh
spike in violence over an unprecedented challenge to President
Hosni Mubarak's 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 costs have been a key driver of the turmoil
in Egypt and Tunisia that is 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 highs on
Wednesday.
"Everybody is watching Egypt, we are looking at Yemen too,"
said Christophe Barret, oil analyst at Credit Agricole.
"Mainly, it's fear of contagion to other countries... I
think prices above $100 for Brent are just not sustainable, it's
something that has a very strong impact on the economy, a strong
impact on demand."
Investors are also eyeing European Central Bank President
Jean-Claude Trichet's news conference later in the day for
further clues on how the bank plans to combat rising inflation.
The MSCI world equity index <.MIWD00000PUS> fell around 0.15
percent, with 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 0.4 percent while
emerging stocks <.MSCIEF> added 0.1 percent.
U.S. stock futures were down around 0.1 percent <SPc1>,
pointing to a slightly weaker open on Wall Street later.
OIL AND INFLATION
U.S. crude oil <CLc1> rose 0.7 percent to $91.54 a barrel
while ICE Brent crude for March <LCOc1> rose to as high as
$103.37 a barrel, its highest since Sept. 26, 2008.
Fears have grown that unrest in Egypt and Tunisia could
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 rose to 2.4 percent in January, moving
further above the ECB's target. A survey showed the euro zone's
dominant service sector expanded much faster than initially
thought in January, albeit with some divergences among member
states [].
JP Morgan expects a sustained 10 percent rise in oil prices
would cut global gross domestic product by 0.25 percentage
points.
Bund futures <FGBLc1> were steady ahead of Trichet's news
conference.
Investors are looking for hints on when euro zone interest
rates might rise, given Trichet's recent warnings on the need to
tackle inflationary pressures.
The dollar <.DXY> rose 0.3 percent against a basket of major
currencies while the euro lost 0.4 percent to $1.3751 <EUR=>,
having hit a 12-week high of $1.3862 on Wednesday.
(Editing by John Stonestreet)
