* World stocks decline on worries about economic growth
* Crude oil rises on supply concerns
* Investors turn to gold as safe haven
(Updates prices, adds details)
By Caroline Valetkevitch
NEW YORK, March 1 (Reuters) - U.S. stocks dropped on
Tuesday as oil prices shot up on worries about supply
disruptions, fanning concerns about a dampening effect on
economic growth.
Gold prices rose more than 1 percent to within a dollar of
their record high as escalating violence in Libya and unrest
spreading across the Middle East boosted the precious metal's
safe-haven appeal.
The losses in stocks fueled a bid for U.S. government debt,
another safe-haven area.
World equities, measured by the MSCI All-Country World
Index <.MIWD00000PUS>, fell 0.6 percent. The index had gained
2.8 percent in February.
The U.S. dollar was up slightly against major currencies,
after earlier hitting a fresh 3-1/2-month low.
U.S. stocks, which are up about 25 percent since the start
of September, declined despite data showing the U.S.
manufacturing sector grew in February at its fastest rate since
May 2004.
Federal Reserve Chairman Ben Bernanke, in testimony to the
U.S. Senate Banking Committee, said higher oil prices were
unlikely to have a big impact on the U.S. economy but could
lead to weaker growth if sustained. For details, see
[]
The Dow Jones industrial average <> was down 137.25
points, or 1.12 percent, at 12,089.09. The Standard & Poor's
500 Index <.SPX> was down 17.91 points, or 1.35 percent, at
1,309.31. The Nasdaq Composite Index <> was down 41.67
points, or 1.50 percent, at 2,740.60.
High oil prices are "essentially a huge tax on consumers,
who make up two-thirds of the economy. So there's no way (gross
domestic product) won't suffer on this," said Scott Armiger,
portfolio manager at Christiana Trust in Greenville, Delaware,
which has $6.8 billion in client assets.
U.S. crude for delivery in April <CLc1> rose $2.71 to
$99.68 a barrel, while Brent crude <LCOc1> was up $3.55 at
$115.35 on continued concerns about supply disruptions amid
unrest in Libya. []
Last week Brent crude traded close to $120 per barrel, its
highest in more than two years, due to concerns that political
upheaval in Libya would spread across oil-producing nations in
the Middle East.
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Graphic showing oil price shocks http://r.reuters.com/qes28r
Calculator: Oil price impact on GDP
http://r.reuters.com/jux28r
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Spot gold rallied to a session peak of $1,430.70 an ounce
-- its highest since Dec. 7, when it hit a record $1,430.95.
Gold in February staged its largest monthly rise since last
August, as the turmoil in the Middle East fed demand for
perceived safe-haven assets.
"What gold needed was a catalyst. It found it in the form
of tensions that are surfacing in the Middle East and rising
oil prices, which served as an inflationary threat and also led
to political instability," said Mark Luschini, chief investment
strategist of Janney Montgomery Scott, which manages $53
billion in client assets.
U.S. Treasury prices slipped as profit-taking unwound some
of the market's recent safe-haven rally.
Benchmark 10-year notes <US10YT=RR> were up 1/32, their
yields at 3.41 percent from 3.43 percent late on Monday.
The dollar index <.DXY>, which tracks the greenback's
performance against a basket of major currencies, was up 0.01
percent.
The euro gave up gains against the dollar after Bernanke
noted in his remarks that downside risks to growth have
declined and the risk of deflation was negligible. <EUR=>
Helping to support the view that China's monetary
tightening was beginning to register, data from China showed
manufacturing growth slowed in February while costs jumped.
Analysts said more tightening would probably be needed to cool
inflation due largely to rising oil and food prices.
[]
In Europe, the FTSEurofirst 300 <> index of leading
European shares was down 0.6 percent at 1,161.92.
(Additional reporting by Ryan Vlastelica, Ellen Freilich,
Frank Tang and Wanfeng Zhou in New York; Emelia
Sithole-Matarise and Harpreet Bhal in London; Editing by
Kenneth Barry and Andrew Hay)
