Oil Caps Week at 30-Month High Near $113 a Barrel
Oil surged to a 32-month high on Friday above $126 a barrel on concerns about long-term supply cuts, while expectations of more interest rate hikes in Europe drove the euro to a 15-month peak against the U.S. dollar.
Gold rose to a record high for a fourth straight day as commodities gained broadly on expectations of stronger demand from the worldwide economic recovery and a weaker dollar.
European shares saw a five-week closing high, lifted by rising commodity stocks such as miners, and on optimism over the start of the first-quarter U.S. corporate earnings season next week. But Wall Street stocks ended lower on concerns about the impact of higher energy costs on the economy.
The MSCI main world equity index .MIWD00000PUS rose 0.5 percent to its highest since July 2008, and on track for its third consecutive weekly gain.
Interest rate hikes by China and the European Central Bank this week failed to contain the bullish outlook as investors eyeing heightened inflationary threats flocked to hard assets such as oil, gold and other precious metals as hedges.
"It's an across-the-board surge in all the commodities. Gold, oil ... they're all up. People are dumping the dollar and buying commodities," said MF Global senior commodity analyst Edward Meir.
Brent crude surged $3.98 to settle at $126.65 a barrel, its highest level since August 2008, as the war in Libya, unrest elsewhere in the Arab world and postponed elections in Nigeria drove bullish sentiment on oil.
U.S. crude settled up $2.49 to a 30-month high of $112.79.
The greenback was pressured by the prospect of a U.S. government shutdown as the White House and Congress struggled to break a budget impasse that threatens to shut down the U.S. government and idle hundreds of thousands of federal workers.
Boosted by Thursday's European Central Bank rate hike, the euro rose to its highest since January 2010. The currency was up more than 1 percent on the day at $1.4475 EUR=.
The ECB's move to raise its key interest rate to 1.25 percent has widened the euro zone's yield advantage over the United States, Britain and Japan, where rates remain at record lows.
"The market is ignoring all of Europe's fiscal and banking troubles and trading off a single indicator -- interest differentials," said Avery Shenfeld, chief economist at CIBC World Markets in Toronto.
Stronger-than-expected German trade data helped underscore the health of Europe's largest economy, helping investors side step resurgent doubts over the resilience of the zone following Portugal's request this week for aid.
U.S. stocks fell late in the session. The prospect of a government shutdown motivated investors to buy protection ahead of the uncertain outcome of weekend budget talks. Many traders were buying short-term put options on the SPDR S&P 500 Trust (SPY.P).
The Dow Jones industrial average .DJI was down 29.59 points, or 0.24 percent, at 12,379.90. The Standard & Poor's 500 Index .SPX was down 5.36 points, or 0.40 percent, at 1,328.15. The Nasdaq Composite Index .IXIC was down 15.73 points, or 0.56 percent, at 2,780.41.