(Recasts with U.S. markets, changes byline; dateline previous
LONDON)
* Oil pares gains after surge to new record $143.67 barrel
* Global stocks rise as record oil drives energy shares up
* Dollar rises, euro to rebound on expected ECB rate hike
* U.S. grain futures dive on bearish U.S. crop data
By Herbert Lash
NEW YORK, June 30 (Reuters) - Oil retreated from a new
record over $143 a barrel on Monday and key agricultural
markets backed away from recent highs although it was energy
shares that supported Wall Street as stocks climbed out of
their recent trough.
Oil initially surged to a new high on rising fears of
conflict between Israel and Iran, and energy shares lifted
global stocks that are poised for their worst annual first-half
decline since 2002.
Crude prices hit a fresh record of $143.67 a barrel,
boosting heavyweight oil shares BP <BP.L>, Royal Dutch Shell
<RDSa.L> and Total <TOTF.PA> in Europe and Exxon Mobil <XOM.N>,
Chevron <CVX.N> and ConocoPhillips COP.N in the United States.
Crude prices later gave back much of their gain, partly
reflecting a rebound in the dollar versus the euro as traders
bought back the U.S. currency to tidy up portfolios as the
second quarter ends.
Gold slipped from the five-week high it set earlier in the
session, also on the dollar's rebound.
A revision of U.S. oil demand in April by the U.S. Energy
Information Administration showed the lowest demand for the
month since 2002 as surging fuel costs eroded demand in the
world's top consumer.
Grain prices also slumped after a bearish U.S. Department
of Agriculture report on domestic grain plantings and stocks
took the wind out of commodity markets that were set to post
their strongest quarterly rise in 35 years.
Oil prices have jumped nearly seven-fold since 2002 as part
of a broader commodities rally sparked by surging demand from
emerging economies like China and India. Inflation concerns
encourage investment in real assets such as oil and gold.
Iran's Revolutionary Guards have said Iran would impose
shipping controls in the Gulf and the Strait of Hormuz if it
were attacked. The narrow waterway separating Iran from the
Arabian peninsula accounts for about 40 percent of the world's
oil trade.
U.S. light sweet crude oil <CLc1> rose 44 cents, or 0.31
percent, to $140.65 per barrel, Spot gold prices <XAU=> fell
$4.05 to $923.10. The Reuters/Jefferies CRB Index <.CRB> of 19
commodities was down 0.55 points at 463.85, after earlier in
the session setting a new record high of 466.82.
In U.S. equity markets Exxon and Chevron both rose more
than 1 percent and ranked among the Dow's biggest top-weighted
gainers. An oil index <.OIX> shot up 1.6 percent, but the rise
was offset by a drop in financial stocks.
"Basically you have a massive sell-off through June and in
the absence of additional negative news, the stock market is
getting a breather," said David Katz, chief investment officer
at Matrix Asset Advisors in New York.
"Financials are still weak," he added. "Perhaps people
don't want them to show on their books" as investors close
their books for the quarter.
The S&P financial index <.GSPF> dropped 0.4 percent, while
shares of insurer American International Group <AIG.N> and
Citigroup <C.N>, the largest U.S. bank, ranked as the two
heaviest drags on the S&P 500.
AIG also led the list of the Dow's top-weighted decliners,
helping to curb the blue-chip average's gain.
The FTSEurofirst 300 <> index of top European shares
ended up 0.8 percent at 1,201.36 points, having shed 10 percent
in June compared to a 0.38 percent fall in the same month a
year earlier.
In Europe energy shares rose as inflation remains the
biggest concern among investors, said senior equity strategist
Markus Wallner at Commerzbank in Frankfurt.
"We cannot anticipate the further development of oil since
there are so many different factors at work -- demand and
supply, speculation, a weaker dollar and another risk factor is
geopolitical," Wallner said.
Losses in the euro may be limited ahead of expectations the
European Central Bank will raise interest rates to 4.25 percent
on Thursday to fight inflation in the euro zone that is now
running at double the ECB's target of 2 percent.
Consumer prices jumped to a record annual 4 percent in
June, and analysts said the data released on Monday would
further harden the ECB's resolve to hike rates this week.
"The ECB fears that deteriorating inflation expectations
might induce higher-than-expected wage claims, triggering a
wage inflation spiral," said Clemente de Lucia, an economist at
BNP Paribas in Brussels.
"As these pressures are likely to edge higher in the near
term, risks of the ECB going beyond the expected July hike are
mounting," he said.
European government bonds fell after the euro zone
inflation report, pushing Bund futures to a one-week low and
cementing the market's view that the ECB will boost rates.
"The market had already been preparing for an ECB rate rise
this week," said Wilson Chin, bond strategist at ING. "Given
the inflation data, it is increasingly pricing in one more rise
after that."
U.S. government debt prices were mostly flat as safe-haven
bids spurred by weak stocks and regional manufacturing data
offset inflation jitters sparked by Europe and record oil
prices.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell 4/32 to yield 3.98 percent. The 30-year U.S. Treasury bond
<US30YT=RR> fell 1/32 to yield 4.53 percent.
The dollar gained against major currencies, with the U.S.
Dollar Index <.DXY> up 0.29 percent at 72.531. Against the yen,
the dollar <JPY=> was up 0.04 percent at 106.16.
The euro <EUR=> fell 0.37 percent at $1.5736.
The National Association of Purchasing Management-Chicago
said its index on U.S. Midwest manufacturing showed contraction
for a fifth straight month in June, but the rate was less
severe than forecast.
Japan's Nikkei share average fell 0.5 percent and chalked
up its biggest first-half decline since 1995. The index has
fallen 12 percent since the start of the year.
The broader pan-Asia index was up 0.4 percent -- although
down around 14 percent so far this year in the largest
first-half drop since 1992 when Japan was in a recession.
(Reporting by Walker Simon, Vivianne Rodrigues, Richard Leong
in New York and Patrizia Kokot, Jane Merriman, Naomi Tajitsu
and Jan Harvey in London)
(Reporting by Herbert Lash. Editing by Richard Satran)
