* Higher oil boosts energy shares
* US stocks off as Kuwait scraps venture with Dow Chemical
* Europe, Japan stocks end up, dollar falls, gold gains
By Daniel Bases
NEW YORK, Dec 29 (Reuters) - Violence in the Middle East
drove up the price of oil and weakened the dollar on Monday on
worries about threats to crude supplies, helping to drive a
safe-haven bid for U.S. Treasuries and for gold.
U.S. stocks fell with the scrapping of a $17.4 billion
petrochemical joint venture between Kuwait and Dow Chemical,
overshadowing a rise in energy shares on the higher oil
prices.
European stocks closed higher, however, on advances in
energy companies and banks, while Japanese stocks rose after
reports of a potential merger of three insurance companies.
"Price action this morning has been driven mainly by a
sudden rise in global risk aversion following the attacks in
Gaza, which in turn led to a spike in oil and gold," said Matt
Esteve, a foreign exchange trader at Tempus Consulting in
Washington D.C.
Israeli warplanes pounded the Hamas-ruled Gaza Strip for a
third consecutive day on Monday, killing more than 325 people
in the deadliest violence in the coastal territory in decades.
Concerns that the violence, which has sparked protests
across the Middle East, might impact oil supplies, sent U.S.
light sweet crude oil <CLc1> up 35 cents, or 0.93 percent, to
$38.06 per barrel. The weaker U.S. dollar also helped lift
oil.
"It's a terrible situation and it just seems to be again
causing major concerns for all the markets," Peter McGuire,
managing director at Commodity Warrants Australia, said of the
Gaza violence.
"But where it's going, nobody knows. Who can speculate on
war?"
The dollar was down against a basket of major
trading-partner currencies in thin holiday conditions. The U.S.
Dollar Index <.DXY> was off 0.95 percent at 80.199.
The euro <EUR=> was up 1.17 percent at $1.4225. Against the
Japanese yen, the dollar <JPY=> fell 0.57 percent at 90.17.
The dollar shed 2.30 percent against the Swiss franc to
trade at 1.0430 <CHF=> on a safe-haven play.
Sterling, however, fell 0.51 percent against the U.S.
dollar to $1.4572 <GBP=>. The British pound also fell to a
record low against the euro of 97.99 pence <EURGBP=>, as it
approached parity for the first time since the euro was
launched in 1999.
The slide in the pound came after reports pointed to a
further slide in UK home prices in 2009.
Figures showed housing prices in England and Wales fell 8.7
percent in 2008 with the onset of recession and the prospect of
rising unemployment over 2009 likely leading to further
declines. (For more, click on []).
GLOBAL STOCKS MIXED
Energy companies gained on the Gaza Strip violence.
The FTSEurofirst 300 <> index of top European shares
closed up 0.83 percent to 810.37.
BP <BP.L>, gas producer BG Group <BG.L> and Tullow Oil
<TLW.L> added between 3.6 and 3.4 percent.
European banking and pharmaceutical shares also rose.
In U.S. trade, Chevron <CVX.N> rose 1.12 percent to $71.14
while Exxon Mobil <XOM.N> gained 0.41 percent to $77.51.
But U.S. benchmark stock indexes were down after Kuwait's
decision to end a petrochemical joint venture with Dow Chemical
<DOW.N> ignited worries that Dow, the largest U.S. chemical
company, would not be able to complete its planned purchase of
rival Rohm & Haas <ROH.N>.
Dow Chemical's stock plunged 20.2 percent to $15.10 while
Rohm & Haas tumbled 18.0 percent to $52.10.
The Dow Jones industrial average <> fell 74.47 points,
or 0.87 percent, at 8,441.08. The Standard & Poor's 500 Index
<.SPX> lost 8.57 points, or 0.98 percent, at 864.23. The Nasdaq
Composite Index <> dropped 25.16 points, or 1.64 percent,
at 1,505.08.
The possible threat to the merger of Dow Chemical and Rohm
& Haas added to fears about a faltering global economy.
Earlier in Japan, the Nikkei average ended up 0.1 percent,
helped by news that three non-life insurers including Mitsui
Sumitomo Insurance Group Holdings were in talks to merge.
U.S. Treasuries were broadly higher. The benchmark 10-year
U.S. Treasury rose 14/32 of a point in price, pushing the yield
down to 2.08 percent. That is not far above a 50-year nadir of
2.04 percent reached on Dec. 18 <US10YT=RR>.
On euro zone government bond markets, the interest
rate-sensitive two-year Schatz yield plumbed another record low
of 1.710 percent <EU2YT=RR>. Lond-dated Japanese government
bond yields touched five-year lows.
Spot gold prices <XAU=> rose $10.75, or 1.24 percent, to
$878.40.
(Additional reporting by Jeremy Guant, Ian Chua, Rebekah
Curtis in London and Vivianne Rodrigues, Leah Schnurr in New
York; Editing by Leslie Adler)
