US stocks drop as oil resumes rise

Stocks on Wall Street have reversed their recent upward trend, hurt by another rise in oil futures.

Oil has climbed back above $US98 a barrel as rebel forces in Zawiya fight off an attempt by forces loyal to Libyan leader Muammar Gadhafi to retake the city, which is less than 50km from the capital Tripoli.

Meanwhile, a military council has been established in rebel-held Benghazi in eastern Libya, indicating the country is now firmly divided.

The latest round of US economic data showed manufacturing activity turned in its best performance since May 2004 last month. The Institute for Supply Management's manufacturing index moved to a very strong 61.4 from 60.8 in January. The index had been expected to come in at 60.9. Readings over 50 indicate growth.

However, spending on construction projects fell for a second month in a row during January, pulled down by declines in hotels, roads, and other non-residential projects.

In mid afternoon trading, the Dow Jones Industrial Average is down 116 points, or 0.9%, to 12,109, erasing early gains. Verizon Communications shed 2.1%, Alcoa lost 2% and General Electric declined 1.7%.

The Nasdaq Composite has shed 1.3% to 2745. The S&P 500 index has dropped 1.2% to 1311, led lower by the materials and industrial sectors.

Other markets: Europe down, Asia up
European stocks ended the first trading day of March in the red, as concerns regarding the unrest in the Middle East and North Africa escalated.

A Rabobank report said higher oil prices would not only weigh on economic growth but also raised the danger of inflation, creating challenges for central banks.

The Stoxx Europe 600 index ended down 0.6% at 284.63 after two consecutive sessions of gains. The UK's FTSE 100 fell 1.0% to 5935.76, Germany's DAX slid 0.7% to 7223.30 and France's CAC-40 closed 1.1% lower at 4067.15.

Indian stocks led Asian sharemarkets higher after Monday's federal budget didn't raise excise duties and as February sales increased.

Stocks in Shanghai and Hong Kong advanced after two separate surveys showed China's manufacturing activity continued to expand in February.

Japan's Nikkei Stock Average advanced 1.2% to 10,754.03, Taiwan's Taiex finished 1.5% higher at 8727.56 and India's Sensex climbed 3.5% to 18,446.50.

The Shanghai Composite Index rose 0.5% to 2918.92 and Hong Kong's Hang Seng Index gained 0.3% to 23,396.42.

Against the trend, Australia’s S&P/ASX eased back 0.1% to 4826.40.

Commodities: Oil, gold up
Concerns about inflation pushed gold futures to their highest price in nearly two months, while silver continued to rise above 31-year highs.

Gold for March delivery was up $US12.30, or 0.9%, at $US1,421.60 an ounce in New York. Its intraday high of $US1422.30 was the strongest gold price since January 3.

March silver's peak of $US34.425 was the highest since March 6, 1980.

Crude-oil futures moved higher after an opposition website in Iran reported increasing violence against protesters in Tehran, as Middle East unrest spreads.

Light, sweet crude for April delivery traded $US1.34, or 1.4%, higher at $US98.31 a barrel in New York. Brent crude on the ICE futures exchange traded $US1.75 higher at $US113.55 a barrel.

Currencies: Dollar up, euro down
The US dollar firmed modestly, assisted by strong domestic economic data. The euro was knocked to session lows just above $US1.38 in the wake of the data, but recovered to near $US1.3825 in uneven trading, compared with $US1.3799 late Monday.

The euro remained below offshore highs around $US1.3855. The dollar bought ¥82 from ¥81.81. The euro changed hands around ¥113.46 compared with ¥112.30. Meanwhile, the pound was trading at $US1.6325 from $US1.6256.