LONDON: World stocks fell further from a recent 30-month high on Wednesday while the euro rose as unrest in Libya drove oil higher and fanned concerns about inflation that could hamper a global economic recovery.
Wall Street suffered its worst day since August on Tuesday as the turmoil in oil exporter Libya gave investors an excuse to sell stocks and consolidate positions after a rally that has driven world stocks 6 percent higher this year.
The spike in oil prices comes at a time when many fast-growing emerging economies already face rising price pressure and the need to raise interest rates.
European Central Bank officials also stressed they stand ready to fight inflation with tighter monetary policy on Tuesday, prompting interest rate futures to bring forward expectations for a quarter point interest rate hike to August.
"There's an awful lot of things to worry about at the moment ... and the Libya situation just adds to it, boosting the oil price and stoking inflationary concerns," said David Morrison, market strategist at GFT Global. The MSCI world equity index was down 0.15 percent, falling more than 2 percent from Monday's peak. The Thomson Reuters global stock index was down 0.15 percent on the day.
US stock futures were up around 0.4 percent, pointing to a firmer open on Wall Street later.
The FTSEurofirst 300 index fell a quarter percent. Oil companies with operations in the Middle East fell, including BP and Royal Dutch Shell, down 1.2 and 0.8 percent respectively.
Emerging stocks lost 0.4 percent.
OIL RISK
Popular protests have toppled entrenched leaders in Egypt and Tunisia, but Libya's defiant leader Muammar Gaddafi said he would not be forced out by the unrest sweeping Africa's third-largest oil producer.
At least three oil companies have halted output in Libya, which pumps 1.6 million barrels per day, or nearly 2 percent of global supply.
Brent crude futures rose to $107.30 a barrel, having hit a 2-1/2-year high of $108.70 on Monday. US crude futures were 57 cents firmer at $95.99 a barrel, near the highest level since October 2008.
The euro rose 0.6 percent to $1.3735. Luxembourg's Yves Mersch and Nout Wellink of the Netherlands both said on Tuesday the ECB was ready to fight inflation by increasing interest rates when needed -- adding to a series of warnings from the bank's policymakers this year.
"The associated warning about the risks of distortions from excessively low interest rates might not have been a clarion call for higher rates, but again highlight the clear divergence with the approach of the Fed," said David Watt, strategist at RBC Dominion Securities.
"These comments overshadowed concerns about the EU periphery."
The dollar fell 0.4 percent against a basket of major currencies.
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