GLOBAL MARKETS-Oil and gold ease, shares put in year-end rally

By Jeremy Gaunt, European Investment Correspondent

LONDON, Dec 30 (Reuters) - Oil and gold prices eased on Tuesday after recent price spikes related to violence in the Middle East, while the dollar fell against major currencies and stocks were generally higher.

It was the last trading day of the year for some financial markets. Japan's Nikkei average .N225 closed with a 42 percent loss for 2008, the worst in its 58-year history.

"2008 was the year of the serpent, everyone got bitten," said Paul Biddle, a fund manager with Souls Funds Management in Australia.

But investor fears stemming from Israel's bombardment of Gaza appeared to be easing. Demand concerns overwhelmed supply fear on oil markets with crude CLc1 falling below $40 a barrel to around $39.40.

Oil is heading for a loss of nearly 60 percent in 2008 after reaching an all-time high earlier in the year.

Investors also booked profits in gold after it rallied to an 11-week high on Monday. It XAU= was down around 1 percent at $868 an ounce.

Israel rejected any truce with Hamas Islamists on Tuesday and said it was ready for "long weeks of action" on a fourth day of the fiercest air offensive in the Gaza Strip in decades.

Medical officials put the total Palestinian death toll since Israel launched its offensive on Saturday as Gaza gunmen stepped up rocket fire, at 348 and more than 800 wounded. [nLU691622]