* Oil hits 2-1/2-year high, pulls back on Gaddafi rumor
* Gold hits record peak, silver at 31-year high on Libya
* US, European stocks fall on rising oil prices
(Updates with U.S. markets close, adds Nikkei futures)
By Walter Brandimarte
NEW YORK, March 7 (Reuters) - Global stocks fell on Monday
as the growing violence in Libya and worries about other Middle
Eastern countries drove prices of oil and gold higher, raising
concerns about the global economic recovery.
Oil jumped to a 2-1/2-year peak while gold hit a record
high as fighting escalated around one of Libya's key oil ports.
Prices of both retreated later on talk that Libyan leader
Muammar Gaddafi was trying to negotiate his exit from the
country.
Also weighing on U.S. stocks was a Wells Fargo downgrade of
the semiconductor sector, which has been leading a rally on
Wall Street since the beginning of September. Asian stocks
looked set to open lower, with Nikkei futures traded in Chicago
<NKH1> falling 1.9 percent to 10,450.00 points.
The euro was little changed against the dollar, after
reaching a four-month high against the U.S. currency, as
expectations of an interest rate hike by the European central
bank faded. Resurging debt concerns triggered by a Moody's
downgrade of Greece also weighed on the European currency.
Brent crude oil futures <LCOc1> jumped to their highest
level since September 2008 before finishing 0.8 percent lower,
at $115.04 per barrel, as investors took the opportunity to
pocket some profits.
U.S. crude futures <CLc1>, however, closed up 0.98 percent
at $105.44 a barrel after trading as high as $106.95, also the
highest level since September 2008.
"The major risk remains the prospect of the political
unrest spreading to the Gulf-producing region," said Caroline
Bain, economist at the Economist Intelligence Unit. "However,
even if there is civil unrest in Saudi Arabia, it is not a
given that oil production will be affected."
The prospects of further unrest in oil-rich Middle Eastern
countries drove investors to seek safe-haven assets. Spot gold
prices <XAU=> hit a record high of $1,444.40 an ounce while
silver <XAG=> rose as high as $36.52 an ounce, its highest
since early 1980, before both retreated along with oil prices
in the afternoon.
Gold prices, however, are seen resuming their climb.
"With all the problems in Africa and the Middle East, we
are likely to see huge price spikes and high volatility. I
don't see that changing anytime soon," said Bruce Dunn, vice
president of bullion dealer Auramet Trading.
On Wall Street, technology shares led losses after Wells
Fargo downgraded the chip industry to "market weight" from
"overweight," saying the sector will grow moderately in 2011
compared with the past two years. For details, see
[]
The Dow Jones industrial average <> closed down 79.85
points, or 0.66 percent, at 12,090.03, while the Standard &
Poor's 500 Index <.SPX> fell 11.01 points, or 0.83 percent, to
1,310.14. The Nasdaq Composite Index <> lost 39.04 points,
or 1.40 percent, to 2,745.63.
In Europe, the FTSEurofirst 300 index <> of top
shares closed 0.41 percent lower.
MSCI's All-Country World Index of global stocks
<.MIWD00000PUS> fell 0.69 percent while its emerging market
benchmark <.MSCIEF> slid 0.57 percent.
"There are still problems in Libya and there are concerns
the oil price might curb economic recovery, " said Heino
Ruland, strategist at Ruland Research in Frankfurt. "I think
investors will continue to reduce exposure to their risk
profile."
PORTUGUESE YIELDS HIT RECORD HIGH
Refinancing costs of peripheral euro-zone countries rose
after Moody's slashed its rating on Greece by three notches,
signaling more downgrades in the near future. []
Portuguese 10-year yields <PT10YT=TWEB> rose to a euro
lifetime high of 7.65 percent, also pushed higher by a
government debt sale later this week.
Scheduled sales of $66 billion in U.S. government debt this
week also weighed on U.S. Treasuries prices. The 30-year bond
<US30YT=RR> lost 13/32 in price while its yield climbed to
4.6219 percent.
The euro <EUR=EBS> was little changed at $1.3972 after
earlier reaching a four-month high of $1.4036 on electronic
trading platform EBS.
The European single currency had been strengthening since
ECB President Jean-Claude Trichet surprised investors last week
by saying that euro-zone interest rates may rise as early as
next month.
(Additional reporting by Rodrigo Campos, Chris Reese, Nick
Olivari; Editing by Leslie Adler)
