* Global equities rise alongside commodities
* Euro at 15-month peak on EU rate hike optimism
* Dollar pressured as U.S. government shutdown looms
* Oil above $125, gold notches another record high
(Updates prices, adds details)
By Leah Schnurr
NEW YORK(Reuters) - Oil rose above $125 a barrel
Friday to its highest since August 2008 on concerns of
long-term supply cuts, while expectations of more interest rate
hikes in the euro zone drove the euro to a 15-month peak
against the dollar.
Commodities, including metals, gained broadly on
expectations of stronger demand and, in some cases, the threat
of supply shortages.
Global equities were boosted by optimism the worldwide
economic recovery will fuel demand for commodities, and shares
hit their highest level in almost three years. U.S. stocks
opened higher but were little changed by late morning.
Boosted by Thursday's European Central Bank rate hike, the
euro rose to its highest since January 2010. The currency was
last up 0.8 percent at $1.4413.
The greenback was also pressured by the prospect of a U.S.
government shutdown, and U.S. 10-year Treasury yields rose near
Republicans and Democrats have been in budget talks trying
to reach an agreement that would avert a government shutdown at
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
ECB President Jean-Claude Trichet said policymakers were
ready to tighten further if needed. But he stressed the ECB had
not decided that Thursday's move was the first in a series.
"Trichet's press conference was neutral and suggests to us
that the bank is embarking on a gradual series of rate
increases of perhaps 25 basis points per quarter," said Jon
Wetreich, currency strategist at Brown Brothers Harriman.
Stronger-than-expected German trade data helped underscore
the health of the euro zone's largest economy, helping
investors sidestep resurgent doubts over the resilience of the
zone following Portugal's request this week for aid to cope
with its debt.
Brent crude surged $2.63 to $125.30 per barrel on
the weak dollar and after attacks on Libyan oil fields. Ongoing
unrest in other parts of the world and postponed elections in
Nigeria have also led to a bullish attitude on oil.
Libyan rebels said they repulsed a government assault on
the besieged city of Misrata but prospects faded for a military
overthrow of Muammar Gaddafi.
Protests erupted across much of the Arab world Friday,
the Muslim day of prayer, with demonstrators dying in Syria and
Yemen. Egyptians staged one of the biggest rallies since
President Hosni Mubarak's fall.
Spot gold hit another record high and silver
climbed past the $40 an ounce level for the first time since
Mining shares led European stock gains and the FTSEurofirst
300 index provisionally closed up 0.2 percent. The
MSCI main world equity index rose 0.6 percent
to its highest since July 2008, on track for its third
consecutive weekly gain.
The Dow Jones industrial average edged down 4.16
points, or 0.03 percent, at 12,405.33. The Standard & Poor's
500 Index added 0.34 points, or 0.03 percent, to
1,333.85. The Nasdaq Composite Index was off 1.84
points, or 0.07 percent, to 2,794.30.
In Washington, the White House and Congress worked to break
a budget deadlock and avoid a federal government shutdown,
after President Barack Obama and congressional leaders failed
to reach a deal in late-night talks.
"With all the focus recently on debt problems in the euro
zone periphery, what is going on in the U.S. highlights that
the U.S. has budget problems of its own, while the euro
continues to be driven by the prospect of more rate hikes,"
said Carl Hammer, currency strategist at SEB in Stockholm.
(Additional reporting by Nick Olivari in New York and
Sebastian Tong in London; Editing by Padraic Cassidy)
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