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Oil prices fall. Stocks recover.

Oil prices fell from their highs on prospects of higher OPEC production. After flirting with $120 a barrel in London, oil prices declined to nearly $114.

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Traders work in the oil options pit at the New York Mercantile Exchange in New York, March 7, 2011. On March 8, oil prices in London eased, helping steady some world markets.

Seth Wenig/AP

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Oil fell from recent highs on Tuesday on reports that OPEC may boost production, prompting some recovery on equity markets.

Emerging market stocks were up 0.4 percent and Japan's Nikkei closed up 0.2 percent. Europe's FTSEurofirst 300 put in gains of around 0.5 percent by 0900 GMT.

Kuwait's oil minister said OPEC was in talks to boost production for the first time in more than two years.

Such a move would mean the producer group's was effectively putting a cap on prices to help keep the global economic recovery on track.

Brent oil was down around $1 at just above $114 a barrel, after earlier dropping more than $2.

Revolts in Tunisia and Egypt, fighting in Libya, and protests from Morocco to Oman had driven Brent to almost $120 a barrel.

This in turn has rattled global investors who fear a burst of inflation, along with potential interest rate hikes, could deal a blow to global economic recovery.

"If oil stays in a $100-$120 per barrel range for around half a year the global economy could see a severe slowdown, pushing investors away from stocks, so everything depends on the Middle East now", said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

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Despite the concerns, however, equities have remained resilient during the period.

MSCI's all-country world stock index is still up 3.6 percent for the year to date and within reasonable range of new 30-month highs.

EURO PAUSES

The euro slipped against the dollar, pausing from a rally prompted by expectations that euro zone interest rates will be raised as early as next month.

The Swiss franc, which has strengthened as a safe haven recently, slid after the statement from Kuwait's oil minister.

The dollar was up 0.2 percent against a basket of major currencies, including the euro and Swiss franc.

Some analysts say that with an ECB rate rise in April largely priced in and indications that currency speculators have ramped up their long euro positions, the euro is ripe for a short-term correction.

Bund futures opened little changed with focus on an upcoming Portuguese bond auction likely to keep pressure on the euro zone's lower-rated states.

Portuguese bond yields hit a euro-era high in the previous session and Greek debt suffered after its credit rating was slashed.

"The periphery had a good wobble yesterday so we may see more of the same ... Portugal can't be far off asking for help," a trader said.

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