Awwal 15, 1432 H/Feb 18, 2011, SPA -- World shares fell back from fresh 30-month highs on Friday against a background of rising oil prices and new attempts by China to curb its inflation pressures, according to Reuters. Brent crude rose above $103 a barrel as unrest spreading across the Middle East fanned fears of a supply disruption in the major oil-producing region. China underlined investor concern about rising global inflation, fuelled now by rising oil prices, by raising lenders' required reserves by 50 basis points. In Paris, China was said to be dragging its feet over efforts by G20 states to agree ways of measuring and correcting imbalances in the world economy, resisting the inclusion of indicators on currency rates and reserves. China has also increased interest rates three times in the past four months and ordered banks to issue fewer loans. But its annual inflation still rebounded to 4.9 percent in January from 4.6 percent a month earlier. One impact on Friday was to take the gloss off a global rally in stocks that has driven world shares up around 5 percent, with developed market indexes such as the U.S. S&P 500 , Japanese Nikkei 225 and European FTSEurofirst 300 gaining between 5.5 and 6.6 percent. The MSCI all-country world stock index was down less than 0.1 percent after earlier hitting a fresh 30-month high. The FTSEurofirst 300 was down 0.2 percent after rising for five consecutive sessions. Earlier, Japan's Nikkei closed up with tiny gains. Investors have been pouring into stocks, attracted by higher earnings and a view that the world economy is on track for solid growth. "There is just a greater conviction in the more promising outlook in global economic growth," said Mike Lenhoff, chief strategist at wealth manager Brewin Dolphin. "We are moving from recovery phase to a sustainable expansion." The flip side of the growth picture, however, is that of rising inflation, which may soon come to eat into corporate margins and prompt central banks to tighten abundant money supply, as China is doing. INFLATION So oil prices -- and their impact on global inflation -- remained in focus as protestors in Bahrain and Libya bury people killed in recent clashes. In Libya's eastern city of Benghazi early on Friday, thousands of anti-government protesters crowded on to the streets, a day after demonstrations led to skirmishes with security forces in which more than 20 people may have been killed. Tension between Israel and Iran also continued over the latter's plans to send navy ships through the Suez Canal, a move that Israel has called a "provocation". "Short-term geopolitical nervousness will continue to underpin Brent prices, but in terms of fundamentals, support will come from the gradually recovering U.S. economy and the ongoing momentum in China," said David Cohen, director at Action Economics in Singapore. Rising inflation, meanwhile, was underlined by German producer prices for January exceeding forecasts to post their strongest year-on-year rise since October 2008, up 5.7 percent. On foreign exchange markets, the euro slipped due to ongoing speculation European officials will struggle to agree on how to strengthen the euro zone's defences against debt problems. The single currency was pressured after figures showed emergency overnight borrowing at the European Central Bank remained exceptionally high, highlighting concerns about the health of euro zone banks. The dollar recovered losses as investors took a breather from selling before a U.S. market holiday. The euro traded 0.3 percent lower on the day at $1.3565. Sterling meanwhile rose against both currencies on market talk that another member of the Bank of England's Monetary Policy Committee had moved into the hawks' camp by voting for a rate rise in February. Minutes of the February meeting, at which the bank left rates on hold at a record low of 0.5 percent despite rising inflation, are due for release on Wednesday.
