(Adds close of U.S. markets)
* Record oil drives energy shares up, keeps Dow from slide
* Oil pares gains after surge to new record $143.67 barrel
* Dollar rises, euro to rebound on expected ECB rate hike
* U.S. corn, wheat futures dive on bearish U.S. crop data
By Herbert Lash
NEW YORK, June 30 (Reuters) - The price of oil, corn and
wheat retreated on Monday, signaling possible inflation relief
ahead, after crude again hit a new record and a rise in energy
shares kept Wall Street from deepening last week's trough.
Crude initially surged to a new high of $143.67 a barrel on
rising fears of conflict between Israel and Iran, boosting the
shares of global oil heavyweights like Exxon Mobil <XOM.N>,
Royal Dutch Shell <RDSa.L> and France's Total SA <TOTF.PA>.
Oil later slid as a U.S. Energy Information Administration
report of weak U.S. demand in April -- the lowest demand for
the month since 2002 -- countered mounting tensions in the
Mideast over Iran's nuclear program.
The slide in oil prices also partly reflected 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.
Despite a slight rise for the session, the Dow and broad
Standard & Poor's 500 Index in June posted their worst
one-month drop since September 2002. The Dow's performance so
far this year was its worst since the first six months of 1970.
A decline of 11.8 percent in the first six months of the
year were the worst for global equity markets, as measured by
MSCI <.MIWD00000PUS>, since the end of 2002.
The April revision in oil demand comes several months
before gasoline prices in June scaled new highs, suggesting
energy demand is softening.
"This revision of the U.S. oil demand for April has
certainly put pressure on crude futures," said Phil Flynn of
Alaron Trading. "This is a huge revision, and it happened when
(fuel) prices were still lower, so you can expect that there
could be more future downgrades in demand data."
U.S. crude <CLc1> settled 21 cents lower at $140.00 a
barrel, after hitting an all-time high of $143.67 earlier.
London Brent crude <LCOc1> settled 48 cents lower at $139.83.
Two key U.S. farm crops also dived, with U.S. corn futures
reacting to bearish crop data issued by the U.S. Agriculture
Department before the start of trading in Chicago.
Corn futures dived the maximum daily trading limit of 30
cents per bushel and could take the wind out of commodity
markets that were set to post their strongest quarterly rise in
35 years. Corn prices also tumbled on the USDA report.
"A combination of extra supply and slower demand is clearly
not good for prices," said analyst Gavin Maguire of Iowa Grain,
a Chicago trade house.
Gold slipped from the five-week high it set earlier in the
session as declining oil prices dented gold's appeal as an
inflation hedge.
Gold <XAU=> last traded at $925.95/927.15 in New York.
The Reuters/Jefferies CRB Index <.CRB> of 19 commodities
was down .166 points at 462.74, after earlier in the session
setting a new record high of 466.82.
Bellwether energy stocks Exxon <XOM.N>, Chevron <CVX.N> and
ConocoPhillips <COP.N> rose more than 1 percent and ranked
among the Dow's biggest gainers and also boosted the S&P. An
oil index <.OIX> shot up almost 1.5 percent.
Rising oil shares offset a decline in the financial sector.
The chief executive of the Bank of New York Mellon Corp <BK.N>
said he expected further losses from the sector and said he
believes the U.S. housing crisis could continue for some time.
"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 2.2 percent.
The Dow Jones industrial average <> was slightly better
than breakeven, up 3.50 points, or 0.03 percent, at 11,350.01.
The Standard & Poor's 500 Index <.SPX> also barely rose, up
1.62 points, or 0.13 percent, at 1,280.00. The Nasdaq Composite
Index <> fell 22.65 points, or 0.98 percent, at 2,292.98.
In Europe, the FTSEurofirst 300 <> index of the
region's top 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.
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.
U.S. government debt was unchanged to slightly higher. The
benchmark 10-year U.S. Treasury note <US10YT=RR> was unchanged,
with the yield at 3.97 percent. The 30-year U.S. Treasury bond
<US30YT=RR> rose 2/32 to yield at 4.5 percent.
The dollar rose against major currencies, with the U.S.
Dollar Index <.DXY> up 0.28 percent at 72.521. Against the yen,
the dollar <JPY=> added 0.03 percent at 106.15.
The euro <EUR=> fell 0.32 percent at $1.5744.
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, Matthew Robinson, Vivianne
Rodrigues, Richard Leong and Frank Tang in New York and
Patrizia Kokot, Naomi Tajitsu and in London)
(Reporting by Herbert Lash. Editing by Richard Satran)
