Markets gave up much of their early gains Friday morning after oil prices jumped following a new attack on a key Iraqi oil pipeline.

At shortly after midday, the S&P/TSX composite had fallen back into negative territory, down 33.78 points or 0.4% to 8363. It was past the 8440 level at one point early in the morning. The TSX Venture exchange was ahead by 7.35 points or 0.47% to 1563.20.

In New York, the Dow Jones industrial average was up 18.28 points or 0.18% at 10181.4, after climbing as high as 10238 in early trading. Sixteen of the Dow’s 30 stocks were moving lower. The Nasdaq composite index was down eight points or 0.43% at 1904. 5 after hitting an early high of 1926. The S&P 500 was barely unchanged at 1107.09.

In Toronto, all but the energy and metals sub-indices were down, with information technology and health sectors leading the way into the red. Nortel Networks Corp. and ConjuChem Inc., which Wednesday posted mixed clinical test results, were among the most active — trading more than 3.5 million shares each.

The Canadian dollar jumped 0.93 of a cent to US76.42¢ after the American dollar weakened on tame inflation data that suggested U.S. interest rates will continue to rise at a measured clip.

In Canada, June inflation data released Friday made it more likely the Bank of Canada will raise interest rates in September.

Continued high gasoline prices kept Canada’s annual rate of inflation in June at 2.5%, the same as in May. But the core rate – which excludes volatile items like energy and is closely watched by policy-makers – edged up slightly to 1.7%, from 1.5% in May.

In the United States, consumer prices rose a modest 0.3% in June, half the size of the previous month’s advance and fresh evidence that inflation poses no immediate threat to the economy.

Meanwhile, crude futures climbed above US$41 a barrel on the New York Mercantile Exchange to trade at its highest levels in over six weeks as another attack on a key Iraqi pipeline sparked fresh concerns over oil output disruptions.

In the U.S. a weaker-than-expected consumer sentiment report from the University of Michigan further weighed on sentiment. The University of Michigan’s consumer sentiment index for July rose to 96.0 from 95.6 in June, slightly below the consensus forecast of economists polled by CBS MarketWatch of 96.4.

The market tone had improved on word late Thursday of IBM’s 17% increase in second-quarter profits, beating Wall Street’s forecast. From April through June, IBM earned US$1.99 billion or US$1.16 per share, on revenue of US$23.15 billion backed by strong growth in computer hardware sales.

In other news, Martha Stewart Living Omnimedia Inc. surged $2.71 to US$11.35 after its namesake founder was sentenced to a much lighter than expected sentence of five months in jail, two years probation and a $30,000 fine for lying about a stock sale unrelated to her company.

Overseas, Tokyo’s Nikkei Stock Average of 225 issues rose 26.86 points, or 0.24%, to 11,436.

Hong Kong’s Hang Seng Index jumped 119.79 points,or 1% to end at 12,059.2 in a two-hour session that was halted because of an approaching storm.

London’s FTSE 100 index, Frankfurt’s DAX 30 and the Paris CAC 40 were flat.