* Oil falls on Chavez's Libya mediation proposal
* Stocks slightly higher
* ECB expected to sharpen anti-inflation stance
By Jeremy Gaunt, European Investment Correspondent
LONDON, March 3 (Reuters) - A proposal by Venezuela
President Hugo Chavez to try to broker a peace deal in Libya
briefly pushed oil lower on Thursday, while recently risk-averse
stock markets put in some gains.
European markets were volatile ahead of a European Central
Bank meeting that was expected to sharpen its anti-inflation
line. []
Early losses of around $3 a barrel in crude oil were pared
back on reports of continued fighting in Libya, including air
strikes against rebel positions.
Brent crude oil <LCOc1> fell as low as $113.09 a barrel but
was later back up around $116.
World stocks as measured by MSCI <.MIWD00000PUS> were up 0.2
percent.
The early moves in oil were prompted by Chavez, a good
friend of Libyan leader Muammar Gaddafi, suggesting a commission
from Latin America, Europe and the Middle East could be formed
to try to reach a negotiated outcome to the Libyan crisis, which
has driven oil prises to levels that may threaten global
economic recovery.
Arab League Secretary-General Amr Moussa said the proposal a
was under consideration by his group.
Some oil analysts suggested that the proposal was a
convenient excuse for traders to adjust their positions.
"If it's coming out of Chavez, it might not have a great
degree of substance," said Tim Riddell, head of technical
analysis at ANZ in Singapore.
"The fact that the markets have been so volatile and without
having concrete evidence of any material shift in the unrest in
the Arab world suggests to me that we are at best
consolidating."
Financial markets have nonetheless become highly sensitive
to North Africa and Middle east tension because of the broad
impact that a rising oil price has on everything from corporate
profits to consumer confidence and interest rate projections.
STOCKS RISE
European shares rose on Thursday buoyed by positive U.S.
economic news overnight and the falling oil price.
The FTSEurofirst 300 <> index of leading European
shares was up 0.4 percent, partially recovering the previous
session's 0.7 percent fall.
Forecast-beating U.S. private sector jobs data and positive
comments from the Federal Reserve in its latest Beige Book
report overnight helped buoy equities in both the United States
and Asia.
"(There is) some hope that the global recovery is strong
enough to weather any shocks that may arise due to uncertainties
in the Middle East," said Zahid Mahmood, senior dealer at
Capital Spreads.
The euro hovered near a four-month high against the dollar,
supported by expectations that the ECB meeting will pave the way
for rate rises later in the year.
Investors have pushed the euro up about 3 percent from a low
hit on Feb. 14.
The euro was slightly weaker against the dollar at $1.3851
<EUR=>, but close to its four-month peak of $1.3890 hit on
trading platform EBS on Wednesday.
Euro zone government bonds traded lower ahead of the ECB
meeting.
(Additional reporting by Neal Armstrong and Simon Falush;
Editing by Hugh Lawson)
