World stocks rally, oil down on Libya hopes

NEW YORK: Oil prices slipped and world stocks rose on Monday above recent 11-month lows on hopes the conflict in Libya could be ending as energy shares higher after last week's equity market selloff.

US stocks jumped at the open, led by Exxon Mobil Corp, which rose 2 percent. Investors, however, offset buys of risky assets by continuing to buy gold. Persistent worries that the sovereign debt crisis in euro zone peripheral countries may spread to bigger economies in the region encouraged flows into gold, pushing it to another record high.

The cost for euro zone banks to borrow money from one another rose again on Monday, heading back toward their highest levels since late 2008, as US banks remained wary of lending to European counterparts in the face of the intractable debt crisis.

Brent crude oil fell 1.6 percent. The potential for a restart of Libyan oil flows into the market if the Gaddafi regime collapses weighed on the benchmark oil price. If Libyan production comes back it would ease gasoline prices, a potential boost to economies worldwide.

Libyan government tanks and snipers put up scattered resistance in Tripoli after rebels swept into the heart of the capital, cheered on by crowds hailing the end of Muammar Gaddafi's 42 years in power.

The Dow Jones industrial average was up 171.80 points, or 1.59 percent, at 10,989.45. The Standard & Poor's 500 Index rose 19.24 points, or 1.71 percent, at 1,142.77. The Nasdaq Composite Index gained 53.62 points, or 2.29 percent, at 2,395.46.

European stocks rose 1.8 percent.

The benchmark MSCI world equity index gained 1 percent on Monday but has fallen for five weeks in a row and looks to be heading for its worst monthly performance since October 2008, when markets were reeling after the collapse of Lehman Brothers.

Gold hit a third consecutive all-time high near $1,900 an ounce after staging its biggest weekly gain in 2-1/2 years last week.

The euro rose 0.3 percent. The dollar held above a record low around 75.94 yen hit on Friday, thanks to concerns about intervention by Japanese authorities. It was at 76.74.

The US currency fell 0.2 percent against a basket of major currencies.

Investors are waiting to see whether the Federal Reserve flags further stimulus when bankers gather in Jackson Hole, Wyoming later this week, a year after Chairman Ben Bernanke launched a second round of quantitative easing to revive the economy.

Additional bond purchases by the Fed could help reflate asset prices, but many view the chances of a third round of quantitative easing as limited and expect the Fed to take gradual measures to boost the economy.

Copyright Reuters, 2011