Stocks weighed down by oil price rises

AP News
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Posted: Mar 07, 2011 7:05 AM
Stocks weighed down by oil price rises

Rising oil prices weighed on stock markets Monday as the violence in Libya escalated, while a major ratings agency warned Greece may default on its debts.

Investor sentiment has in recent weeks been dented by the clashes in Libya, where rebels looked to regroup after forces loyal to longtime leader Moammar Gadhafi appeared to be clawing back ground.

The main market impact has been in the oil markets. Under normal circumstances, Libya produces about 1.6 million barrels of crude per day, but its output has been heavily affected by the violence. The country also has the biggest proven oil reserves in Africa.

Investors are also concerned that political upheaval could intensify in the Middle East, where Iran, Iraq, the United Arab Emirates, Kuwait, Bahrain, Qatar, Oman and Saudi Arabia have more than 60 percent of the world's oil reserves.

By late morning London time, the price of a barrel of crude as traded on the New York Mercantile Exchange was up $1.77 at $106.19 while the equivalent Brent rate in London spiked $2.15 a barrel to $118.11.

The rise in oil prices hurt stocks, which are effectively a leading indicator of perceptions for economic growth, despite Friday's upbeat U.S. jobs figures.

"Concern that unrest in Libya will spread has pushed oil prices higher still and left traders with little reason to be buying equities," said Terry Pratt, a trader at IG Markets.

In Europe, the FTSE 100 index of leading British shares was up 0.3 percent at 6,011 while France's CAC-40 fell an equivalent amount to 4,009. Germany's DAX was 0.1 percent lower at 7,169.

Wall Street was poised for a fairly subdued opening _ Dow futures were up a point at 12,156 while the broader Standard & Poor's 500 futures were flat around 1,320.

Further weighing on stocks was a warning from Moody's Investor Services that Greece may have no option but to restructure its debts in the next couple of years despite the country's euro110 billion ($154 billion) bailout last May.