No panic yet for equities from $100-plus oil

By Sitaraman Shankar - Analysis

LONDON (Reuters) - As the oil price floats past $100 a barrel, European equity investors, more preoccupied with the credit market crisis, have yet to press the panic button.

Demand for products from fast-growing emerging markets, a stronger currency and a decline in oil's importance in industrialised economies have combined to mute the impact of the price rise, analysts said.

Oil hit record highs earlier this week when it flirted with $104 a barrel, and is some 4 percent higher this year after rising as much as 57 percent last year. Crude's average price this year is around $94 against $72.30 for the whole of 2007.

This should have caused unbearable pressure on costs for a variety of industries, ranging from chemicals to cement producers, hurting demand and ultimately profits.

Worst still, many feared it would be the tipping point that could force cash-strapped households to cut back spending and cause economic activity to slow.

Yet there's been no panic selling of stocks by investors as companies appear to be weathering the oil price rise, in part because of demand from emerging markets, analysts said.

"We've gone past $60, $70 and now $100 a barrel, and demand destruction has been far less than people had expected," said Fortis Bank strategist Philippe Gijsels.

"This could be because demand is much stronger than we think, which shows a decoupling between the United States and the rest of the world," he said.