(Updates prices, adds markets focusing on U.S. inflation)
By Jeremy Gaunt, European Investment Correspondent
LONDON, Feb 20 (Reuters) - Oil prices near $100 and delays
in debt payments by an affiliate of private equity giant KKR
spooked financial markets on Wednesday, battering stocks and
driving the cost of corporate debt insurance to all-time peaks.
Wall Street looked set for a poor start, although attention
was focused on U.S. consumer price data due later in the day as
investors worried about inflation.
Oil prices eased from their record high above $100 reached
on Tuesday, but were mainly correcting after a massive move. New
York crude <CLc1> was trading around $99 a barrel.
Heady prices for oil, along with other commodities such as
platinum, wheat and gold, are worrying investors because rising
inflation will make it harder for central banks to cut interest
rates to help spur ailing economies.
"(There is) ongoing evidence that commodity prices are not
responding to the cyclical slowdown," Goldman Sachs said in a
note.
CIBC World Markets warned that the rising prices and
stuttering economies could rekindle fears of stagflation.
In the meantime, investors have been shaken by a series of
reminders that the trouble in the credit markets that began last
summer has not gone away.
The latest came from KKR Financial Holdings <KFN.N>, the
listed affiliate of private equity group Kohlberg Kravis Roberts
& Co [].
In a filing with the U.S. Securities and Exchange Commission
on Tuesday, it said it had delayed repayment of debt backed by
mortgage securities for the second time and begun a new round of
talks with creditors.
NEW CREDIT JITTERS
The news hit stocks and knocked jittery credit markets hard,
with the widely watched iTraxx Crossover index <ITRCRS5EA=GFI>
breaking above 600 basis points for the first time, a reflection
of soaring debt-insurance costs.
"The mood was generally bad already, and then this came out.
It really dented confidence," said Hiroaki Osakabe, fund manager
at Chibagin Asset Management in Japan.
It followed Tuesday's news from Credit Suisse <CSGN.VX> that
it had marked down the value of asset-backed investments by
$2.85 billion.
The pan-European FTSEurofirst 300 index <> was down
around 1.1 percent, hit also by British lender Alliance &
Leicester <ALLL.L> taking a writedown and earnings from French
bank BNP Paribas <BNPP.PA> failing to excite.
Earlier, Japan's benchmark Nikkei share average <>
closed down 3.3 percent at 13,310.37. The broader TOPIX <>
was down 3.2 percent at 1,302.72.
The dollar ticked up ahead of U.S. data with some analysts
saying a strong inflation reading would limit cuts in U.S.
interest rates.
Economists polled by Reuters estimated consumer price
inflation ran at a relatively robust rate of 4.2 percent
year-on-year in January, up from December's 4.1 percent.
The dollar was flat at 107.68 yen <JPY=> as was the euro at
158.63 yen <EURJPY=>. The euro lost 0.1 percent to $1.4708
<EUR=>.
Yields on 10-year euro zone bonds <EU10YT=RR> drifted around
4 percent after coming under pressure on Tuesday on safe-haven
buying triggered by Credit Suisse.
(Additional reporting by Antonina Vorobyova, editing by Mike
Peacock)
