MIKE

By Stephen Kirkland
Bloomberg
Feb 21, 2011 7:44 AM PT

Oil rose to a two-year high and gold rallied for a sixth day surpassing $1,400 an ounce, as tension in the Middle East escalated. Stocks fell for the most in a month as Eni SpA led companies with operations in Libya lower.

Brent crude gained as much as 2.5 percent, trading up 2.4 percent at 10:40 a.m. in New York. Gold climbed 1.1 percent and silver added 3.4 percent. The Stoxx Europe 600 Index declined 1.3 percent, with Eni sinking the most since July 2009 on a closing basis. Standard & Poor’s 500 Index futures lost 0.8 percent. Bahrain’s 2020 bond yield increased for a 10th day after S&P cut its debt rating. The New Zealand dollar strengthened against its major peers. U.S. markets were closed for the Presidents’ Day holiday.

Libyan security forces attacked anti-government protesters as demonstrations spread across the Middle East and North Africa, a region that accounts for 36 percent of global crude output. Chinese authorities blocked foreign news reports on protests across the country to stamp out any movement toward pro-democracy revolts.

“You’ve got to be very concerned, particularly because it can affect the oil price, and if you have the oil price spike up another $20, $30, you could reenter a global recession,” Bill Belchere, global chief economist at Mirae Asset Securities, said in a Bloomberg Television interview in Hong Kong.

Brent crude rose to as high as $105.08 in London. West Texas Intermediate oil for April delivery jumped 4.2 percent to $93.49 a barrel in New York. Gold climbed to as high as $1,404.22 an ounce, and last traded at $1,404.15. Silver rose to a 30-year high of $33.7625 an ounce.

Libya Ties

Eni, the largest foreign oil and gas producer in Libya, lost 5.3 percent, while OMV AG, central Europe’s biggest oil company, which has been in Libya since 1975, slid 5.1 percent. Tekfen Holding AS tumbled 8.4 percent as the Turkish builder suspended work on a Libyan project, saying its priority now is the safe evacuation of 1,197 non-Libyan employees.

Merck KGaA gained 3.7 percent as earnings beat forecasts. Alpha Bank SA rose 5 percent as the shares resumed trading following a takeover bid from National Bank of Greece SA.

The MSCI Emerging Markets Index slid 0.1 percent. Benchmark indexes in Russia and South Africa rose more than 1 percent while gauges in Turkey, Dubai and Morocco sank at least 1.3 percent. Brazil’s Bovespa fell 1 percent.
Facing Civil War

Muammar Qaddafi’s son called on protesters to engage in dialogue or face a civil war, as violence escalated amid reports protesters seized control of Libya’s second-biggest city. Violence has flared in Yemen, Djibouti, Iran and Bahrain as governments sought to crack down on demands for change.

Bahrain’s dollar bond due 2020 fell as S&P cut its rating and signaled further downgrades were possible, saying it expected protests to persist. The 10-year bond yield rose 16 basis points to 6.79 percent, increasing 89 basis points since Feb. 7. The cost of insuring the country’s debt against default using credit default swaps rose seven basis points to 312, according to CMA.

Default swaps on Dubai jumped 11 basis points to 448, contracts on Qatar increased seven basis points to 113, and those for Saudi Arabia climbed five basis points to 144, according to CMA.

India’s Sensitive Index climbed 1.3 percent on gains by oil shares and Wipro Ltd.’s biggest rally since November after Credit Suisse Group AG recommended the software services provider. Vietnam’s VN Index slumped 4 percent, the most since November 2009, after the government said it will raise electricity prices by a record 15.3 percent.

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