* US crude at 2-1/2-year high on supply disruption fears
* Gold hits record peak, silver at 31-year high on Libya
* US, European stocks rise as acquisitions lift sentiment
* Euro shrugs off Greece downgrade, supported by rate view
(Updates with U.S. markets open, changes byline, dateline,
previous LONDON)
By Walter Brandimarte and Emelia Sithole-Matarise
NEW YORK/LONDON, March 7 (Reuters) - Crude oil prices
jumped to a 2-1/2-year peak while gold hit an all-time high on
Monday as investors worried that widening unrest in Libya could
spread to other oil producing nations in the Middle East.
Risk premium on Greek, Portuguese and Spanish debt rose
after Moody's cut Greece's credit rating by three notches. The
euro, however, shrugged off the move and hit a four-month high
against the dollar on expectations the European Central Bank
may raise interest rates next month. []
Stocks traded higher in the United States and Europe,
despite worries about escalating oil prices, as a batch of
proposed mergers and acquisitions lifted sentiment.
U.S. crude oil futures <CLc1> jumped 2 percent to as high
as $106.95 as Libyan leader Muammar Gaddafi's counter-offensive
against rebels deepened concerns that Africa's largest holder
of oil reserves is headed for civil war. []
Gold spot prices <XAU=> hit a record high of $1,441.50 an
ounce as investors rushed to safe-haven assets. Silver <XAG=>
rose as high as as $36.38 an ounce, a 31-year peak.
"If we do see tension escalating further, then we could
witness a new high in gold. Besides Libya, I think investors
will also be looking at other countries within the Middle East.
The example will be Saudi Arabia," said Ong Yi Ling, investment
analyst at Phillip Futures in Singapore.
U.S. and European stocks posted gains, however, as
investors hunted for bargains, also inspired by news of several
mergers and acquisitions.
The Dow Jones industrial average <> rose 61.91 points,
or 0.51 percent, to 12,231.79, while the Standard & Poor's 500
Index <.SPX> gained 5.69 points, or 0.43 percent, to 1,326.84.
The Nasdaq Composite Index <> was up 4.18 points, or 0.15
percent, at 2,788.85.
In Europe, the FTSEurofirst 300 index <> of top
shares climbed 0.55 percent.
Gains were limited, however, as investors fret that a
prolonged period of high oil prices could stifle economic
growth and erode corporate profits, while adding to
inflationary pressures.
"There was a pretty aggressive sell-off towards the last
couple of hours of trading on Friday and we have seen investors
come in and buy from the lows (but) as long as you have crude
prices as high as they are that's going to limit further gains
for equities," said Joshua Raymond, market strategist at City
Index.
MOODY'S DOWNGRADES GREECE
Risk premium paid by peripheral euro-zone countries were on
the rise after Moody's slashed the rating of Greece by three
notches, signaling more downgrades in the near future.
[]
Greek bonds underperformed German benchmark debt,
increasing the 10-year yield spread <GR10YT=TWEB> <DE10YT=TWEB>
by 7 basis points to 912 bps, although Bunds failed to gain
much traction as investors watched widening clashes in Libya.
The euro <EUR=> strengthened to a four-month high of
$1.4037 as investors left debt concerns on the back burner to
focus on expectations that the ECB will tighten monetary policy
before the Federal Reserve. The European single currency was
trading 0.19 percent higher later in the morning, at $1.4008.
"Sentiment is bullish at the moment and we could see a test
of the 1.4080/00 area," said Richard Wiltshire, chief foreign
exchange dealer at ETX Capital.
"The euro will stay bid on any dips ahead of April's rate
announcement. I would assume they can't change their rhetoric,
and we have seen a growing number of ECB officials talking
about rate hikes sooner rather than later."
(Additional reporting by Rodrigo Campos, Jan Harvey, Harpreet
Bhal and Jessica Mortimer, Editing by Chizu Nomiyama)
