Risk aversion's the name of the game

It's a morning of upheaval, and investors are playing it safe.

After violent riots rocked Libya, an earthquake shook New Zealand and Moody's Investors Service threatened to downgrade Japan's credit rating, money is heading into U.S. Treasuries, the U.S. dollar and the Swiss franc.

World stocks fell nearly 1 percent as deadly clashes roiled the biggest cities in Libya and drove oil prices sharply higher, sparking fears that global economic growth could be disrupted. U.S. crude futures hit a 2-1/2 year high, rising close to 8 percent to more than $94 (U.S.) a barrel.

U.S. stock index futures also tumbled, suggesting losses on Wall Street when it opens. Standard & Poor's 500 Index futures lost 1.5 percent, while Dow futures dropped 0.9 per cent and Nasdaq futures slid 1.7 per cent.

The yield on 10-year U.S. Treasuries fell nearly 8 basis points to 3.51 percent as nervous investors pushed prices higher. Yields on core euro zone debt lost 5 basis points to 3.131 percent.

The U.S. dollar rallied broadly, up 0.6 percent against a basket of major currencies while the euro lost close to 1 percent to $1.3551. The euro also fell 1 percent on the day to 1.2793 Swiss francs, pushing the traditional safe-haven currency to its strongest in three weeks.

Gold , another safe-haven investment, rose to $1396.50, up $7.90 or 0.6 per cent.

Investors continued to sell riskier emerging market stocks. MSCI's benchmark emerging market stock index fell 1.7 percent. For that matter, pretty much every major stock market in the world is down, with MSCI world index 1 per cent lower.

The New Zealand dollar hit a near two-month low against its U.S. counterpart after investors fretted about the economic damage caused by a strong earthquake that rocked the country's second biggest city, Christchurch, killing at least 65 people.

Moody's cut its outlook for Japan's credit rating to negative from stable, making it more likely the actual rating could be downgraded. It cited "increasing uncertainty" over the world's third-largest economy's ability to implement effective measures to rein in rising debt. The warning comes less than a month after Standard & Poor's cut Japan's sovereign debt rating.