Oil up on Middle East; M&A boosts equities

By Leah Schnurr

NEW YORK (Reuters) – Commodities prices rose on Monday as Brent crude topped $120 a barrel on concerns over the impact on supply from unrest in the Middle East, while corn surged to match a record-high price set during the 2008 global food crisis.

Merger and acquisition activity helped global equities eke out gains. Wall Street ended little changed, but the M&A trend revved up after the closing bell, with Texas Instruments (TXN.N: Quote, Profile, Research) saying it will buy National Semiconductor (NSM.N: Quote, Profile, Research) for about $6.5 billion in cash.

The euro hovered near a five-month peak against the dollar and an 11-month high against the yen, with near-term strength seen limited as an expected euro zone interest rate rise was mostly priced in.

Brent crude oil futures settled up $2.36 at $121.06 after reaching $121.29, the highest intraday price since August 2008. After choppy trading, U.S. crude settled up 53 cents at $108.47 a barrel, the highest close since September 2008.

Nigerian election delays and a short-lived strike in Gabon added to the list of geopolitical supply concerns. Libya’s continuing conflict and unrest in Yemen could pose threats to supply in the Middle East, while investors expect demand for oil could grow on signs of improvement in the U.S. economy.

Corn futures extended a rally that began last week when the U.S. Department of Agriculture pegged quarterly corn stocks as of March 1 at levels well below trade expectations, with tightening supply underscoring the strong demand for the feed grain.

“There are no signs saying corn won’t go higher. Stocks were bullish for corn and now planting weather doesn’t look good,” said Mario Balletto, analyst for Citigroup.

Earlier in the day, spot corn equaled its record high of $7.65 per bushel set on June 27, 2008. Chicago Board of Trade corn futures unofficially ended up at $7.59.

EQUITIES STRUGGLE

World stocks as measured by MSCI (.MIWD00000PUS: Quote, Profile, Research) were up 0.3 percent, hovering around a one-month high and up nearly 5 percent for the year to date. European shares rose to a three-week closing high with the FTSEurofirst 300 (.FTEU3: Quote, Profile, Research) up 0.04 percent at 1,142,84.

Belgian chemicals group Solvay (SOLB.BR: Quote, Profile, Research) bid for French rival Rhodia (RHA.PA: Quote, Profile, Research), driving up Rhodia’s shares 48 percent, and Vodafone (VOD.L: Quote, Profile, Research) said it was selling its 44 percent stake in France’s second-biggest telecom operator, SFR, to Vivendi (VIV.PA: Quote, Profile, Research).

On Wall Street, the S&P 500 ended slightly higher but failed to break above the 1,333 closing level last hit in mid-February. Caution ahead of earnings season held volume to its lowest of the year and suggested the recent rally may be fading.

“Volume has dried up here as investors and traders are sitting on their positions to see what happens” in the upcoming earnings season, said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford, New York.

Shares of National Semiconductor surged more than 73 percent to $24.41 after the deal announcement, while Texas Instruments dipped 1.5 percent to $33.60.

The Dow Jones industrial average (.DJI: Quote, Profile, Research) added 23.31 points, or 0.19 percent, to 12,400.03. The Standard & Poor’s 500 Index (.SPX: Quote, Profile, Research) edged up 0.46 point, or 0.03 percent, at 1,332.87. The Nasdaq Composite Index (.IXIC: Quote, Profile, Research) dipped 0.41 point, or 0.01 percent, to 2,789.19.

Economic improvement has cemented expectations that the ECB will raise interest rates on Thursday and led to speculation the U.S. Federal Reserve may be getting closer to withdrawing exceptional liquidity.

Investors were awaiting Fed Chairman Ben Bernanke’s speech ahead of a Federal Reserve Bank of Atlanta conference, scheduled for 7:15 p.m. EDT Monday.

A top Federal Reserve official said on Monday that U.S. inflation is likely to remain low for now, but policymakers will keep a close eye on potentially self-fulfilling consumer expectations of higher prices.

Reflecting expectations of differing rate paths, the euro hit an 11-month high against the yen and touched a five-month peak against the dollar. The euro later slipped back.

The euro rose above 120 yen for the first time since May 2010 and was last at 119.47, down 0.1 percent. Against the dollar, the euro last traded at $1.4217, down 0.1 percent.

Traders expect the euro to stay near current levels in the coming days, with resistance seen around $1.4281, the November high.

(Reporting by Leah Schnurr; Additional reporting by Angela Moon, Wanfeng Zhou and Robert Gibbons in New York, Carey Gillam in Kansas City; Editing by Dan Grebler)

Oil up on Middle East; M&A boosts equities