SINGAPORE: Oil prices rose and Asia stock prices fell on Tuesday as markets anxiously watched the unfolding crisis in Libya, with investors turning to safe haven gold which in turn pushed up silver to its highest level in 31 years.
Brent crude oil futures rose by more than $2 to as high as $108.18 per barrel, before giving up some of the gain, on continued fears that violence in Libya could lead to wider supply disruptions from the OPEC country.
Japan's Nikkei 225 index was down 1.96 percent and the MSCI's index of Asia Pacific shares outside Japan was off about 1.8 percent.
Moody's Investors Service changed the outlook on Japan's Aa2 sovereign rating to negative from stable, warning that government policies may not be enough to rein in public debt.
"The market is not reacting much to the decision," said
Takeshi Shibasaki, chief financial analyst at Mizuho Securities. "Standard and Poor's has already cut Japan's rating, and separately there already were expectations among participants that Moody's would do something."
European stocks lost more than 1 percent on Monday on a combination of fears over Libya, where Muammar Gaddafi faced a mounting revolt against his 41-year rule, signs of imminent interest rate rises and more evidence of a poor earnings season.
US markets were closed Monday for a holiday.
The US dollar edged up against a basket of major currencies, although the Australian dollar eased and could suffer further declines as mounting tension in the Middle East drives investors to cut risk.
Dealers said thin trading due to the US holiday kept markets subdued overnight, although this was punctured in early Asian trade by a flurry of activity as the dollar surged some 30 pips against the yen to 83.50 , followed by a hasty retreat back to 83.16.
Traders said there was some confusion about what triggered the move, with some saying it was a miscommunication on the execution of the trade and others saying it was an attempt to break the 114.00 barrier for euro/yen.
The euro traded at $1.3676 , continuing to struggle after failing to hold above $1.3700. The single currency also lacked the vigour to break above key resistance after Germany's main ruling party suffered a crushing defeat at a regional election in the city-state of Hamburg on Sunday.
Brent crude for April delivery stood at $106.86 per barrel. On Monday, it had hit a two-and-a-half year high for any nearby month of $108.70. The unrest in Libya shut down 6 percent of oil output in Africa's No.3 producer and prompted a number of energy firms to pull out international staff, sending Brent oil prices above $105 a barrel.
Libyan forces loyal to Gaddafi, the world's second-longest-serving ruler after the Sultan of Brunei, have fought an increasingly bloody battle to keep him in power with residents reporting gunfire in parts of the capital Tripoli and one political activist saying warplanes had bombed the city.
Security forces had killed dozens of protesters across the country, human rights groups and witnesses said, prompting widespread condemnation from world leaders.
Gold, a traditional refuge in times of tumult, extended gains and rose to its highest in seven weeks, lifting silver to its strongest level since 1980.
Spot gold rose $3.75 to $1,409.70 an ounce, its highest in seven weeks, but soon drifted back into negative territory. Silver jumped above $34 an ounce, its highest since 1980.
New Zealand's quake-ravaged Christchurch city was struck by a second major tremor in five months on Tuesday, causing "multiple fatalities", police said.
News of the quake helped send the New Zealand dollar to as low as $0.7541, down about 1.2 percent from late US levels on fears the damage could dent confidence in the already fragile economy. New Zealand's benchmark NZX 50 index was down 0.9 percent.
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