Iraq unrest drives up oil, dollar; shares flat

Reuters
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A man walks past the London Stock Exchange in the City of London October 11, 2013. REUTERS/Stefan We …

By David Gaffen and Herbert Lash

NEW YORK (Reuters) - Escalating violence in Iraq drove crude oil and the dollar higher on Friday while damping the appetite for global equity markets, even as bullish news from the U.S. tech sector lifted stocks on Wall Street.

Brent crude edged above $113 a barrel, up more than $4 this week, on concerns that an insurgency in Iraq could trigger civil war and eventually crimp oil exports.

Iraq's most senior Shi'ite cleric urged his followers to take up arms to defend themselves against the advancing Sunni militants, potentially escalating the conflict.

"The market in general is trying to assess the risks on Iraq. There was a big market reaction and then the IEA (International Energy Agency) said it did not see a risk to supplies so the volatility is reflecting this," said Olivier Jakob at Petromatrix consultancy.

The dollar strengthened against a basket of major currencies for the first time in three sessions as Iraqi violence triggered a safety bid for the U.S. currency. Higher U.S. bond yields also underpinned the move.

European stocks closed slightly lower but shares on Wall Street rose after Intel Corp INTC.O raised its full-year revenue outlook, citing stronger-than-expected demand for personal computers used by businesses.

Intel added the most gains to the three major indices on Wall Street, and its shares were up 6.9 percent at $29.89.

MSCI's all-country world equity index .MIWD00000PUS slipped 0.02 percent, and was down 0.7 percent for the week.

The FTSEurofirst 300 .FTEU3 index of top European shares closed down 0.2 percent at 1,389.83, moving further away from this week's 6-1/2-year high.

The Dow Jones industrial average .DJI added 11.85 points, or 0.07 percent, at 16,746.04. The Standard & Poor's 500 Index .SPX was up 2.69 points, or 0.14 percent, at 1,932.80. The Nasdaq Composite Index .IXIC was up 6.74 points, or 0.16 percent, at 4,304.37.

"The market isn't cheap, but it isn't crazy expensive and the sectors that are looking better are cyclical in nature," said Michael Mullaney, chief investment officer at Fiduciary Trust Co in Boston. "Tech has been doing well from a price return standpoint, and that should continue."

Brent LCOc1 was up 24 cents at $113.26 per barrel, off a peak of $114.69, its highest since September.

U.S. crude CLc1 was up 40 cents at $106.93, off a high of $107.68, also a nine-month peak.

The U.S. dollar index .DXY, which measures the dollar against a basket of six major currencies, rose 0.08 percent at 80.657. The euro EUR= slid 0.15 percent against the dollar at $1.3530, while the dollar rose 0.3 percent against the yen JPY= at 102.01.

Despite the decline in riskier assets, benchmark U.S. bond prices fell, pushing yields slightly higher. Sterling surged on Friday after the Bank of England hinted at an interest rate rise this year.

Benchmark U.S. 10-year notes US10YT=RR fell 6/32 in price to yield 2.606 percent.

(Additional reporting by Anirban Nag, Julia Payne and Christopher Johnson; Editing by Nick Zieminski and Dan Grebler))

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