* MSCI APXJ index at 12.7 times forward 12-month PE -I/B/E/S
* Inflation in focus before cbank meetings this wk
* U.S. Treasuries, precious metals gain
By Saikat Chatterjee
HONG KONG, March 7 (Reuters) - Crude oil prices rose to
2-1/2 year highs on Monday as worries about supply disruption
increased due to deepening unrest in Libya, while Asian stocks
declined as concerns about the Middle East also weighed.
European shares are expected to open down between 0.4-0.6
percent, according to financial bookmakers.
Asian markets have see-sawed following volatile oil in
recent weeks, but the MSCI ex-Japan index is
about a percent away from a 2-1/2 year peak tested in January,
indicating markets have been largely resilient to the Libyan
crisis.
Still, investors are worried that a prolonged period of
high oil prices could stifle economic growth and erode corporate
profits, while adding to inflationary pressures in emerging
Asia.
On Monday, the MSCI ex-Japan index fell nearly a percent.
U.S. crude rose to a 2-1/2-year high on Monday as civil war
brewed in Libya, while investors kept a close eye on top
exporter Saudi Arabia, home to most of OPEC's spare capacity,
where clerics forbid protests at the weekend. .
ICE Brent crude for April surpassed $117 a barrel,
trading up 1 percent.
"The concern is that with what we are seeing in Libya, it's
purely fear driving the market," said Jonathan Barratt, managing
director at Commodity Broking Services in Sydney.
"Each time the price moves up a little, people are forced
into the market. Once it's feeding itself, it will continue to
rise," Barratt said, adding $120 may be the peak without further
supply disruptions.
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Oil price shocks http://r.reuters.com/qes28r
Middle East unrest http://r.reuters.com/nym77r
For a graphic of equities' correlation to oil, see:
http://r.reuters.com/mut38r
SNAP ANALYSIS ON U.S. jobs data:
For a graphic on gold prices: http://r.reuters.com/baw38r
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A reasonably strong batch of U.S. data on Friday that showed
the jobless rate falling to a near two-year low failed to boost
sentiment, as investors remained firmly focused on the
developments in the Middle East and the resulting longer-term
impact on oil. .
U.S. crude is up by more than a fifth in the last two weeks.
The spike in oil combined with soaring food prices present
fresh problems for central banks in Thailand, Malaysia, South
Korea and New Zealand who head for policy meetings this week.
The region is a big importer of oil and market players are
worried that sharp increases in prices would stifle growth and
fuel inflationary pressures.
FAIRLY VALUED?
The MSCI APXJ index is trading at 12.7 times forward
12-month earnings, at par with its long-term average, I/B/E/S
data showed -- indicating that markets are now fairly valued.
"Higher oil prices are a key factor weighing on investor
sentiment. Heavier energy costs have numerous negative
implications for a manufacturing-focused energy importer like
South Korea," said Y.S. Rhoo, a market analyst at Hyundai
Securities.
Tokyo's Nikkei average , Australia's S&P/ASX 200
index and South Korea's KOSPI ended down more
than 1 percent each.
Indian stocks fell by nearly 2 percent after a key
ally of the ruling coalition quit, threatening policy
paralysis.
Wall Street erased most of its weekly gains on Friday, with
the S&P 500 Index falling by 0.74 percent. The CBOE
Volatility Index , Wall Street's fear gauge, rose slightly
to 19.11 but stayed well below a May peak of 48.
Rising tensions in the Middle East also stoked demand for
precious metals and government bonds.
Gold , often sought in times of geopolitical tensions,
rose to near a lifetime high at $1,434.60 an ounce, while silver
surged 3 percent to 31-year highs as investors piled into safe
havens. Gold hit a record $1,440 last week.
Treasury debt prices stabilised after Friday's gains with
benchmark ten year notes at 3.49 percent, a shade
above a one-month low of 3.39 percent hit earlier this month.
In currencies, the dollar struggled against a basket of
major currencies after failing to get a big boost from
the U.S. data, while the euro was supported on
expectations of an interest rate hike next month from a hawkish
European Central Bank.
The kiwi dollar held above a one-year low versus
the euro and a five-month low against the dollar but is set to
stay pressured ahead of an expected interest rate cut this week.
(Editing by Ramya Venugopal; Additional reporting by Ian
Chua in SYDNEY, Alejandro Barbajosa in SINGAPORE and Antoni
Slodkowski in TOKYO)
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