Oil climbed to a two-year high while stocks fell the most in three weeks and Treasuries and the Swiss franc gained as anti-government violence escalated in Libya. Oil for March delivery rose as much as 9.6 percent to $94.49 a barrel and traded 6.8 percent higher at 9:36 a.m. in New York. The MSCI World Index fell 1.2 percent and the Bloomberg GCC 200 Index of Persian Gulf shares sank to a five- month low. The Standard & Poor’s 500 Index lost 1.3 percent, the most since Jan. 28. Ten-year Treasury yields slid six basis points. The franc gained 0.8 percent against the dollar. New Zealand’s currency weakened against all of its major peers after a magnitude 6.3 earthquake. Protests in the Middle East are driving oil prices higher, stoking concern inflation will accelerate. At least 250 people died in the Libyan capital Tripoli overnight as violence spread in the nation with Africa’s largest oil reserves, al-Jazeera reported. China told banks to recalculate capital levels to account for higher risk weightings on some loans as it seeks to curb lending, two people with knowledge of the matter said. “If oil continues to rise and the dots get connected beyond Libya, then you can set yourself up for a setback in stocks,” said David Sowerby, a Bloomfield Hills, Michigan-based money manager at Loomis Sayles & Co., which oversees $150 billion. “People are going to wait and see what type of unrest there is in the largest producing oil countries. Risk aversion is going to be everybody’s assessment.” Oil Rallies Oil traded at the highest since October 2008 on the New York Mercantile Exchange, while brent crude climbed as much as 2.7 percent to $108.57 on the ICE Futures Europe exchange. Copper for delivery in three months fell 1.8 percent on the London Metal Exchange, and aluminum, nickel and lead retreated. Cotton for delivery in May declined 3.6 percent, extending its two-day drop to 6.9 percent. Gold for April delivery rose 1.1 percent to $1,403.60 an ounce. The two-year Treasury note yielded 0.74 percent, down from 0.76 percent yesterday. The yield on the German 10-year bund declined two basis points to 3.17 percent. The yield on the equivalent-maturity Japanese note dropped five basis points to 1.26 percent. The S&P 500 retreated from its highest level since June 2008 as trading resumed today after the Presidents’ Day holiday. Wal-Mart Stores Inc. declined 4.1 percent after posting a seventh straight quarterly sales decline at its U.S. stores, trailing its own projections. Home Depot Inc., the largest U.S. home-improvement retailer, reported fourth-quarter profit of 36 cents a shares, compared with 31 cents in a Bloomberg survey. The stock rose 0.2 percent. Home Prices U.S. equities also declined after the S&P/Case-Shiller index of home values in 20 cities fell 2.4 percent in December from the same month in 2009, the biggest 12-month decrease in a year. The Stoxx Europe 600 Index lost 0.7 percent to extend its biggest three-day retreat since November, with four shares falling for every one that rose. Air France-KLM Group, the region’s largest airline, tumbled 3 percent. Deutsche Lufthansa AG, the second-biggest carrier, lost 2.2 percent. Eni SpA, the largest foreign oil producer in Libya, sank 1.8 percent on the Chi-X platform after “technical issues” prevented Italy’s stock exchange from opening, Borsa Italiana SpA said. The cost of insuring against default by Eni increased 6.5 basis points to the highest since July, according to CMA. Qatar, China Qatar’s QE Index fell the most among more than 70 equity markets tracked by Bloomberg worldwide, tumbling 3.6 percent. The MSCI Emerging Markets Index lost 1.5 percent, its largest drop in almost two weeks. Indexes in Abu Dhabi, Dubai, Tunisia, Turkey, South Africa, Taiwan and South Korea slid more than 1 percent. China’s Shanghai Composite Index declined 2.6 percent, the most in a month. The Swiss franc advanced against all 16 of its major counterparts, appreciating 0.6 percent against the euro. New Zealand’s currency tumbled 1.9 percent against the dollar and sank 2 percent versus the yen. The earthquake was the strongest since September when the city was shaken by a 7.0 magnitude temblor, is likely to rise, New Zealand police said in a statement. The quake sent office workers in the country’s second-largest city fleeing into streets covered in shattered glass, paper, bricks and broken concrete. The U.S. is scheduled to sell $35 billion of two-year notes today, to be followed by auctions of five-year debt tomorrow and seven-year securities in two days. To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net. To contact the editor responsible for this story: Paul Sillitoe at psillitoe@bloomberg.net.

Source