World shares rise as oil prices fall

Stocks on Wall Street and in Europe advanced overnight as oil took a breather.

In early afternoon trading, the Dow Jones Industrial Average climbed 1.12 per cent, the Standard & Poor's 500 Index rose 0.97 per cent and the Nasdaq Composite Index advanced 0.96 per cent.

Brent crude fell below US$115 a barrel and US crude weakened below US$105 after Kuwait's oil minister said talks had begun on increasing output. Recent gains in oil prices have weighed on equities amid concern it would curb global growth.

"The story is going to be oil for a while here," Hank Smith, chief investment officer at Haverford Trust Co in Philadelphia, told Reuters.

Among the large gainers were Bank of America after the largest US lender said its residential mortgage business was in "recovery mode".

Sprint Nextel climbed more than 7 per cent amid reports that Deutsche Telekom has held talks to sell its T-Mobile USA unit to Sprint in exchange for a major stake in the combined entity.

Even so, Smith warned that "the market is due for, at a minimum, a pullback, if not a correction, having gone up" so much. The S&P has gained about 25 per cent since September.

Across the Atlantic, the benchmark Stoxx Europe 600 Index increased 0.3 per cent, after declining as much as 0.5 per cent earlier in the session.

Greek banks suffered after yesterday's credit rating downgrade by Moody's Investors Service, with National Bank of Greece SA and EFG Eurobank Ergasias both shedding more than 6 per cent. The yield on Greek 10-year bonds climbed to a record.

The euro slid 0.6 per cent to US$1.3888 amid concern that a potential increase in euro zone interest rates would exacerbate problems in debt-laden European Union members such as Greece and Spain.

"Higher rates will be devastating on the peripheral countries,"

John McCarthy, director of foreign exchange at ING Capital Markets in New York, told Reuters.

Brent crude fell to US$112.23 per barrel, down US$2.81, by 1455 GMT. US light crude futures were down US$1.45 to US$103.99.

Opec has yet to change its production policy officially, even though it has been boosting supply informally for months and Saudi Arabia has offered to help make up for the loss of around two thirds of Libya's output, according to Reuters.

Turmoil across North Africa and the Middle East has lifted oil prices to the highest since September 2008. The chaos in Libya has idled around 1 million barrels per day.

Spot gold was bid at US$1,427.50 an ounce at 1511 GMT, against US$1,430.74 late in New York on Monday.

"Gold is now weighing its options between the continued flight to safety on the one hand and on the other hand, the likely rate increase in Europe as well," Barclays Capital analyst Suki Cooper told Reuters.

Silver was likely to keep outperforming gold thanks to strong dollar flows, though both were still good investments compared with copper and other base metals, said Eric Sprott, who heads Toronto-based hedge-fund Sprott Asset Management.

"I watch where the money goes and the money's going into silver.

There's as much money going into silver as into gold in dollar terms," said Sprott in an interview with Reuters.