* Oil falls on Chavez's Libya mediation proposal
* Stocks slightly higher, Wall Street set for gains
* 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 gains.
Wall Street looked set to open higher and shares in Europe
and Asia gained as the oil price eased and on upbeat U.S.
economic data overnight.
European markets, however, were also poised for the European
Central Bank to sharpen its anti-inflation line, raising the
likelihood it will raise interest rates later this year.
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Brent crude oil <LCOc1> fell as low as $113.09 a barrel but
was later back up above $115 on reports of continued fighting in
Libya, including air strikes against rebel positions.
World stocks as measured by MSCI <.MIWD00000PUS> were up 0.4
percent.
The sharpest 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 prices to levels that may threaten global
economic recovery.
Arab League Secretary-General Amr Moussa said his group was
considering the proposal.
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 the turmoil in North Africa and the Middle East 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 0.9 percent, 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 European Central Bank 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 $1.3855
<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 but a smooth bond auction by Spain, which remains under
pressure in financial markets on uncertainty over whether Europe
can solve its debt crisis, offered markets a small positive
signal. []
(Additional reporting by Caroline Copley, Neal Armstrong and
Simon Falush; Editing by Hugh Lawson and Susan Fenton)
