* Asian monetary policy not excessively loose - IHS
* Tokyo falls more than 2 pct on futures-led selling
* Stocks drop follows Wall Street fall, fear gauge rise
* Precious metals, bonds gain on safe-haven demand
(Adds percentage fall for Wall Street indexes)
By Saikat Chatterjee
HONG KONG, March 2 (Reuters) - Oil rose towards a 2-1/2 year
high and stocks fell on Wednesday as investors shunned risky
assets on concern that escalating tension in Libya would spread
in the Middle East and disrupt fuel supplies.
Brent crude's dizzying 15 percent jump in less than
two weeks has fanned worry about a stifling impact on the
economic recovery, sending investors into relative safe assets
such as gold and government bonds in volatile trading.
Though Asian stocks have gyrated to the swings in oil,
markets have been largely resilient this time around compared
with January's sell-off when investors dumped shares because of
worry about inflation.
While oil's jump has put monetary policy behind the curve in
some countries, many Asian central banks have already tightened
considerably since the recovery began and therefore policy is
not excessively loose in the region, IHS Global Insight said.
Brent crude futures rose 50 cents to $115.92 after the
contract closed on Tuesday at $115.42, its highest finish since
August 2008.
U.S. crude for April rose 73 cents to $100.36.
Shares in most Asian markets fell after Wall Street's slide,
where the main indexes fell between 1.4 percent and 1.6 percent,
and as the CBOE Volatility Index VIX , the so-called fear
gauge, jumped sharply.
Tokyo lead the losers with stocks falling more than
2 percent on futures-led selling. Seoul and Taiwan
both fell.
Yahoo Japan was the notable outperformer with
shares surging by 4.5 percent after a Reuters report that Yahoo
Inc was in advanced talks to wind down its joint
venture in Japan with Softbank Corp .
"The market is volatile as oil's persisting gains and civil
unrest in the Middle East is negatively affecting investor
sentiment," said Lee Sun-yeb, a market analyst at Shinhan
Investment Corp.
"But as long as we do not see the turmoil spreading to other
countries within the region, current volatility will be
contained and will eventually recover," Lee added.
The broader MSCI index of Asia-ex Japan stocks
was down more than a percent. It fell two
percent in February.
In the credit space, Asian sovereign spreads weakened with
the Philippines widening the most by 4 bps to 140/143 bps.
Markets will keenly watch developments in the Middle East,
especially Saudi Arabia, where stock markets tanked by nearly 7
percent on Tuesday and CDS spreads jumped.
GOLD, BONDS GAIN
U.S. Treasuries, a safe-haven asset, held near one-month
lows with 10-year yields stabilising at 3.40
percent, well below a peak of 3.74 percent hit last month.
Japanese government bonds too rose, with futures snapping a
three-day losing streak.
Gold held just below a record high of $1,434 an ounce
while spot silver hit a 31-year high.
In the currency markets, the euro dipped slightly
after failing to break through a key resistance level, though
further declines for the common currency may be limited a day
before a European Central Bank (ECB) meeting.
Given euro zone inflation holding well above the ECB's
target, markets expect the central bank to ramp up its
anti-inflation talk with U.S. Federal Reserve Chairman Ben
Bernanke's comments reinforcing market speculation that the ECB
would raise rates before the Fed.
In Asian FX, the won is among the leading
underperformers with the stock market working through a major
support level.
The New Zealand dollar fell sharply after Prime
Minister John Key said he expected the Reserve Bank of New
Zealand (RBNZ) would cut interest rates next week after the
devastating earthquake in Christchurch.
The Aussie/kiwi was last at NZ$1.3616 after
hitting a high of NZ$1.3667 , levels not seen since
August 1992.
(Additional reporting by Jungyoun Park in SEOUL, Mantik
Kusjanto in WELLINGTON, Krishna Kumar in SYDNEY, Jonathan Rogers
at IFR; Editing by Robert Birsel and Neil Fullick)
* For Reuters Global Investing Blog, click on
http://blogs.reuters.com/globalinvesting
* For the MacroScope Blog, click on
http://blogs.reuters.com/macroscope
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http://blogs.reuters.com/hedgehub
