* Brent jumps 1.6 pct on Libya, lack of OPEC action
* Portugal sells bonds, long-term financing worries remain
* US, European stocks fall on rising oil prices
(Updates with U.S. markets open; changes byline; dateline
previously LONDON)
By Walter Brandimarte
NEW YORK, March 9 (Reuters) - Oil prices resumed their rise
on Wednesday as violence continued to threaten Libya's oil
infrastructure, driving down world equities and stoking demand
for gold.
U.S. Treasuries also rose on a safety bid after the sale of
Portuguese debt at unsustainable high yields.
Brent oil prices <LCOc1> jumped more than 2 percent to
$115.50 a barrel as fighting in Libya intensified and OPEC saw
no need for an emergency meeting to consider raising oil
output. Worries that the unrest could spread into the Middle
East also left investors jittery.
"It's a fear trade," said Michael Hewson, an analyst at CMC
Markets. "It's about the fear of these troubles escalating --
there is some concern about how the Saudi Day of Rage will go
on Friday."
Activists in Saudi Arabia have set up Facebook pages
calling for protests on March 11 and 20.
Expectations that the Organization of the Petroleum
Exporting Countries would respond to the decline in Libya's
output by rising production had driven oil prices lower on
Tuesday, one day after they hit a 2-1/2-year high.
In New York, however, U.S. crude oil futures <CLc1>
reversed earlier gains on Wednesday as investors eyed a
greater-than-expected rise in U.S. stockpiles last week. Oil in
New York was down 0.4 percent at $104.60 a barrel.
The rise in oil prices renewed fears that the economic
recovery could suffer, driving down equities in both the United
States and Europe.
The Dow Jones industrial average <> fell 27.24 points,
or 0.22 percent, to 12,187.14, while the Standard & Poor's 500
Index <.SPX> was down 6.10 points, or 0.46 percent, at
1,315.72. The Nasdaq Composite Index <> declined 19.82
points, or 0.72 percent, to 2,745.95.
The FTSEurofirst 300 <> index of top European shares
was down 0.22 percent at 1,144.95 points after rising to a high
of 1,153.62 earlier in the session.
PORTUGAL IN NEED
Prices of U.S. government bonds rose as investors moved to
safe-haven assets after an auction of Portuguese debt reminded
them of the financial troubles of peripheral euro zone
countries.
Benchmark 10-year U.S. Treasury notes <US10YT=RR> rose 5/32
in price, with the yield at 3.5271 percent. Prices were also
supported by the Federal Reserve's planned purchase of between
$5 billion and $7 billion in notes maturing 2015 and 2016.
Portugal was able to sell 1 billion euros in two-year bonds
at an auction, but its cost of borrowing was the highest since
it joined the euro. Lisbon said such yields were unsustainable
in the long run without Europe-wide action.
"The auction was always going to go OK... but I don't think
clients are particularly interested in buying the bond," said a
trader in London. "The problems remain -- we've got the the
March 25 summit coming up, we've got continued selling in
Greece."
Euro zone leaders meet ahead of the summit on Friday. The
bloc's 17 heads of state are expected to agree the next
cautious steps in their year-long effort to quell the region's
debt crisis but the meeting is unlikely to produce a
breakthrough. []
Meanwhile, the euro fell from an earlier high and traded
slightly higher against the dollar as expectations of a
euro-zone interest rate hike next month faded somewhat.
Investors worry that a monetary policy tightening by the
European Central Bank would raise borrowing costs even higher
for peripheral euro zone economies.
The European single currency <EUR=> was up 0.12 percent at
$1.3919, falling from an earlier four-month high of $1.4036 on
electronic trading platform EBS.
Gold rose as the violence in North Africa and the Middle
East stoked safe-haven demand and on worries over euro zone
debt.
Spot gold <XAU=> was bid at $1,432.20 an ounce at 1511 GMT,
against $1,428.19 late in New York on Tuesday. U.S. gold
futures for April delivery <GCJ1> rose $5.50 an ounce to
$1,432.70.
Copper fell as the strengthening crude oil prices fueled
worries that inflationary pressures could hit economic growth
and demand.
Copper for three-months delivery <CMCU3> on the London
Metal Exchange traded at $9,418 a tonne by 1502 GMT, down from
a close of $9,530 a tonne on Tuesday.
"There's huge uncertainty as to what's going on," said
Daniel Brebner, an analyst at Deutsche Bank. "You've got oil
prices now coming back up," he added. "It's risky, to say the
least."
(Additional reporting by Kirsten Donovan, Karen Brettell,
Edward Krudy, Claire Milhench; Editing by Leslie Adler)
