Stocks Fall as Oil Rises; Silver Advances to 31-Year High on Haven Demand

Stocks fell for the first time in four days and metals dropped after oil traded above $100 a barrel on concern Middle-East unrest will cut supplies. The New Zealand dollar fell after Prime Minister John Key said lower interest rates would be welcome.

The MSCI Asia Pacific Index declined 1.4 percent to 137.02 as of 5:10 p.m. in Tokyo and Stocks Europe 600 Index slid 0.8 percent. Futures on the Standard & Poor’s 500 Index were little changed. Lead and zinc paced the retreat among industrial metals as crude oil rose for a second day on speculation political turmoil in the Middle East may spread from Libya to Iran. Silver hit a 31-year high and Japanese bond futures advanced.

“Concerns that higher oil prices will further jack up inflationary pressures and erode the nascent global economic momentum continue to grip investors,” said Kang Shin Woo, chief investment officer at Seoul-based Korea Investment Management Co., which manages $17 billion. “While another oil shock is pretty much unlikely, the fact that the Middle East is in the midst of turmoil weighs on the overall sentiment.”

Oil for April delivery gained as much as 1 percent in electronic trading on the New YorkMercantile Exchange as Libyan rebels braced for renewed attacks by forces loyal to leaderMuammar Qaddafi and reports showed Iranian protesters clashed with security forces in Iran. South Korean inflation rose to a two-year high in February, breaching the central bank’s 4 percent ceiling for a second month and bolstering the case for an interest rate increase as early as next week.

Beijing Property Sales

More than five shares fell for each that rose on MSCI’s Asian index. The Nikkei 225 Stock Average plunged 2.4 percent in Tokyo, the biggest decline since Aug. 31.

Sharp Corp., Japan’s largest maker of liquid-crystal displays, declined 4.8 percent after Morgan Stanley cut its rating to “equalweight” from “overweight.”

China Vanke Co., the nation’s biggest developer, fell 1.2 percent in Shenzhen after Xinhua News Agency said Beijing home sales tumbled last month. Air China Ltd., Singapore Airlines Ltd. andTaiwan’s EVA Airways Corp. dropped more than 2 percent on concern rising fuel prices will crimp earnings growth at the world’s biggest airlines.

Futures on the S&P 500 Index were little changed today. The benchmark yesterday lost 1.6 percent as surging oil prices overshadowed a report that showed U.S. manufacturing grew at its fastest pace in almost seven years last month.

Oil rose as high as $100.64 a barrel in New York before retreating below $100. Oil for April delivery dropped as much as 42 cents, or 0.4 percent, to $99.21 a barrel in electronic trading on the New York Mercantile Exchange and was at $99.26 at 4:11 p.m. in Singapore. Brent crude futures fell 0.7 percent after rising as much as 0.8 percent earlier.

‘Further Oil Spike’

Brent futures rose to as much as $119.79 a barrel last week as fighting escalated in Libya and tensions that have already ousted leaders in Tunisia and Egypt spread to Oman. Libyan rebels dug in for battle after repulsing attacks by forces loyal to Qaddafi. Iran rejected outside criticism of its handling of the opposition after reports that two prominent dissidents had been arrested.

“The unrest is threatening to spread to Iran, OPEC’s second-largest producer,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in an e-mailed note today. “Given the speed at which events are unfolding, we do not rule out a further spike of $10 a barrel or beyond in the coming weeks.”

Zinc and lead fell 0.8 percent on the London Metals Exchange, while copper was little changed as higher oil prices boosted concern inflation will accelerate and slow global growth. Silver climbed as much as 1.5 percent to its highest level since March 1980.

South Korea Inflation

South Korean inflation accelerated to 4.5 percent in February from a year earlier, from 4.1 percent in January, underscoring the difficulty President Lee Myung Bak is having in containing prices. South Korea’s Kospi Index fell 0.6 percent, while the won was little changed. Philippine Central Bank Governor Amando Tetangco said the nation has little scope to keep borrowing costs at a record low after oil and food costs climbed.

The dollar strengthened against the euro as the civil unrest in North Africa and the Middle East boosted oil prices, spurring concern the global recovery will falter. The greenback rose to $1.3762 per euro from $1.3777 in New York yesterday, when it gained 0.2 percent.

“Events in the Middle East are stinging risk trades,” said Adam Carr, a senior economist in Sydney at ICAP Australia Ltd., a unit of the world’s largest interdealer broker. “We are seeing safe-haven flows in play in the foreign-exchange market.”

New Zealand Rates

Fed Chairman Ben S. Bernanke said that inflation will remain subdued even as commodity prices gain. Experience with price gains in recent decades, along with currently stable labor costs, suggests a “temporary and relatively modest increase in U.S. consumer-price inflation” from rising commodity prices, Bernanke told the Senate Banking Committee.

The New Zealand dollar led declines among major Asia- Pacific currencies. Prime Minister Key said in an interview today that he would welcome a reduction in the benchmark interest rate as the nation grapples with the human and financial toll of a 6.3-magnitude earthquake on Feb. 22.

The earthquake, which killed more than 150 people, is likely to slow an economy that was already near a recession. Christchurch’s second major temblor in six months, following a magnitude 7.0 quake on Sept. 4, wrecked its central business district. Both quakes may have caused as much as NZ$20 billion ($15 billion) worth of damage, Key said this week.

Japan’s 10-year bonds rose, snapping a three-day decline, as higher oil prices boosted demand for the safety of government debt. Futures for March delivery also gained.

The cost of protecting bonds from default in Asia outside Japan rose the most in a week, according to traders of credit- default swaps.

The Markit iTraxx Australia index advanced 4 basis points to 107.5, according to Citigroup Inc. prices. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan added 3.5 basis points, Citigroup prices show. The Markit iTraxx Japan index rose 1 basis point to 102.5

(Source: http://www.bloomberg.com/news/2011-03-02/asian-stocks-fall-as-oil-surges-on-mideast-silver-rises-to-30-year-high.html)