* World stocks knock off fresh 30-month highs
* Oil prices rise again on Middle East tension
* China raises bank reserve requirements
* Dollar slightly stronger versus euro
By Jeremy Gaunt, European Investment Correspondent
LONDON, Feb 18 (Reuters) - World shares fell back from
fresh 30-month highs on Friday against a background of rising
oil prices and new attempts by China to curb its inflation
pressures.
Brent crude rose above $103 a barrel as unrest spreading
across the Middle East fanned fears of a supply disruption in
the major oil-producing region.
China underlined investor concern about rising global
inflation, fuelled now by rising oil prices, by raising lenders'
required reserves by 50 basis points.
In Paris, China was said to be dragging its feet over
efforts by G20 states to agree ways of measuring and correcting
imbalances in the world economy, resisting the inclusion of
indicators on currency rates and reserves.
China has also increased interest rates three times in the
past four months and ordered banks to issue fewer loans. But its
annual inflation still rebounded to 4.9 percent in January from
4.6 percent a month earlier.
One impact on Friday was to take the gloss off a global
rally in stocks that has driven world shares up around 5
percent, with developed market indexes such as the U.S. S&P 500
<.SPX>, Japanese Nikkei 225 <> and European FTSEurofirst
300 <> gaining between 5.5 and 6.6 percent.
The MSCI all-country world stock index <.MIWD00000PUS> was
down less than 0.1 percent after earlier hitting a fresh
30-month high.
The FTSEurofirst 300 was down 0.2 percent after rising for
five consecutive sessions. Earlier, Japan's Nikkei closed up
with tiny gains.
Investors have been pouring into stocks, attracted by higher
earnings and a view that the world economy is on track for solid
growth.
"There is just a greater conviction in the more promising
outlook in global economic growth," said Mike Lenhoff, chief
strategist at wealth manager Brewin Dolphin.
"We are moving from recovery phase to a sustainable
expansion."
The flip side of the growth picture, however, is that of
rising inflation, which may soon come to eat into corporate
margins and prompt central banks to tighten abundant money
supply, as China is doing.
INFLATION
So oil prices -- and their impact on global inflation --
remained in focus as protestors in Bahrain and Libya bury people
killed in recent clashes. []
In Libya's eastern city of Benghazi early on Friday,
thousands of anti-government protesters crowded on to the
streets, a day after demonstrations led to skirmishes with
security forces in which more than 20 people may have been
killed. []
Tension between Israel and Iran also continued over the
latter's plans to send navy ships through the Suez Canal, a move
that Israel has called a "provocation". []
"Short-term geopolitical nervousness will continue to
underpin Brent prices, but in terms of fundamentals, support
will come from the gradually recovering U.S. economy and the
ongoing momentum in China," said David Cohen, director at Action
Economics in Singapore.
Rising inflation, meanwhile, was underlined by German
producer prices for January exceeding forecasts to post their
strongest year-on-year rise since October 2008, up 5.7 percent.
On foreign exchange markets, the euro slipped due to ongoing
speculation European officials will struggle to agree on how to
strengthen the euro zone's defences against debt problems.
The single currency was pressured after figures showed
emergency overnight borrowing at the European Central Bank
remained exceptionally high, highlighting concerns about the
health of euro zone banks.
The dollar recovered losses as investors took a breather
from selling before a U.S. market holiday. The euro <EUR=>
traded 0.3 percent lower on the day at $1.3565.
Sterling meanwhile rose against both currencies on market
talk that another member of the Bank of England's Monetary
Policy Committee had moved into the hawks' camp by voting for a
rate rise in February.
Minutes of the February meeting, at which the bank left
rates on hold at a record low of 0.5 percent despite rising
inflation, are due for release on Wednesday.
(Additional reporting by Harpreet Bhal; Editing by John
Stonestreet)
