GLOBAL MARKETS-Brent falls, gold rallies, stocks cut gains

* U.S. stocks pare gains, near flat

* Brent crude oil falls on hopes for end to Libya conflict

* Gold sets record high again near $1,900 an ounce (Updates, adds details)

By Caroline Valetkevitch

NEW YORK, Aug 22 (Reuters) - Brent crude oil fell on Monday as Libya's civil war appeared to be nearing an end, while gold rallied to another record high as economic worries kept investors flocking to the commodity.

Stocks pared early gains and were near flat in midday U.S. trading, with financials among the hardest hit. In the United States, shares of JPMorgan Chase , down 1.6 percent at $33.79, were the top drag on the Dow industrials, followed by Bank of America , down 6.3 percent at $6.53.

Persistent worries that the United States may be headed for another recession and that the sovereign debt crisis in euro zone peripheral countries may spread to the larger economies have kept investors on edge for weeks.

Banks are seen as most vulnerable to the crisis in Europe. An early bounce in U.S. stocks following four weeks of losses tapered off toward noon.

"The ground zero of all worries is financials," said Charlie Smith, chief investment officer at Pittsburgh-based Fort Pitt Capital Group.

Brent crude fell more than a dollar as investors anticipated the resumption of oil exports from OPEC-member Libya. U.S. crude oil CLc1 , however, rose.

"Brent is taking more of a battering but that's only to be expected," said Christopher Bellew, a trader at Jefferies Bache.

Brent crude LCOc1 was down $1.47 to $107.15.

The potential for a restart of Libyan oil flows into the market if the Gaddafi regime collapses weighed on the benchmark oil price. If Libyan production comes back it would ease gasoline prices and increase disposable income, potentially boosting economies worldwide.

Libyan government tanks and snipers put up scattered resistance in Tripoli after rebels swept into the heart of the capital, cheered on by crowds hailing the end of Muammar Gaddafi's 42 years in power. For more, see: [ID:nL5E7JL0LD]

On Wall Street, the Dow Jones industrial average <.DJI> was up 49.42 points, or 0.46 percent, at 10,867.07. The Standard & Poor's 500 Index <.SPX> was up 2.01 points, or 0.18 percent, at 1,125.54. The Nasdaq Composite Index <.IXIC> was up 5.62 points, or 0.24 percent, at 2,347.46.

The cost for euro zone banks to borrow money from one another rose again on Monday, heading back toward their highest levels since late 2008 as U.S. banks remained wary of lending to European counterparts in the face of the intractable debt crisis. For details, see [ID:nL5E7JM1B5]

The MSCI world equity index <.MIWD00000PUS> slipped 0.1 percent, erasing early gains. The index has fallen for five weeks in a row and looks to be heading for its worst monthly performance since October 2008, when markets were reeling after the collapse of Lehman Brothers.

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Some investors are hoping for the Federal Reserve to announce a new form of stimulus, not long after it promised to keep interest rates "exceptionally low ... at least through mid-2013."

Additional bond purchases by the Fed could help reflate asset prices, but many view the chances of a third round of quantitative easing as limited and expect the Fed to take gradual measures to boost the economy.

The Fed will host its annual retreat in Wyoming this week, and recent market turmoil and signs of weaker U.S. growth have boosted expectations that Fed Chairman Ben Bernanke may hint at more emergency stimulus for the economy.

The speculation put some early pressure on the dollar. But the U.S. currency <.DXY> was last up 0.1 percent against a basket of major currencies.

"The Fed is definitely on people's minds, and you could argue that some of the bounce seen in high-yield commodity currencies is at least in part related to hopes for more policy measures," said Wells Fargo strategist Vassili Serebriakov in New York.

The benchmark 10-year Treasury note was last down 9/32 in price, yielding 2.09 percent versus Friday's close of 2.06 percent, with traders preparing for a $99 billion slate of bond auctions this week.

Gold hit a third consecutive all-time high near $1,900 after staging its biggest weekly gain in 2-1/2 years last week.

Spot gold was up 1.6 percent at $1,888.90 an ounce by 11:33 a.m. EDT (1533 GMT), having earlier hit a record $1,894.10. (Reporting by Caroline Valetkevitch and David Gaffen, with additional reporting by Ashley Lau and Steven Johnson in New York and Claire Milhench in London; Editing by Dan Grebler)