* OPEC mulls boosting production after Libya unrest
* Euro slips for 2nd day on euro zone debt concerns
* Greek 10-year yields hit euro-era high
* Global stocks rise on oil price relief
(Adds Treasuries prices down despite well-bid auction)
By Walter Brandimarte
NEW YORK, March 8 (Reuters) - Oil prices fell sharply on
Tuesday as OPEC considered raising production for the first
time in more than two years and the euro slipped for a second
day on renewed euro zone debt worries.
U.S. stocks rallied as the fall in crude prices eased
worries the economic recovery could be choked off. The recovery
in stocks appeared tentative, however, as investors feared
unrest in Libya and the Middle East could still drive oil
prices up, a day after they hit a 2-1/2-year high.
An official oil output increase by the Organization of the
Petroleum Exporting Countries would signal the group's
determination to cap prices, but continued violence in Libya
left investors jittery. Libya's oil output, normally 1.6
million barrels per day, is estimated to be down by about 1
million barrels per day.
OPEC oil producers are consulting about a supply boost,
Kuwait's oil minister said, but many in the group remain
skeptical. []
"At the moment, I think we just remain nervous -- the
situation in the Middle East is still fluid," said Frank Lesh,
a futures analyst and broker at FuturePath Trading LLC in
Chicago. "We'd like to see a little more clarity there, and we
certainly don't have that."
Brent crude <LCOc1> prices dropped 1.7 percent to $113.06
per barrel, while U.S. light crude futures <CLc1> were 0.7
percent lower at $104.72.
The three major U.S. stock indexes rallied, also supported
by an upbeat profit forecast from Bank of America <BAC.N>,
although analysts cautioned against an imminent pullback.
"The market is due for, at a minimum, a pullback, if not a
correction, having gone up" so much, said Hank Smith, chief
investment officer at Haverford Trust Co in Philadelphia.
The Dow Jones industrial average <> rose 143.99 points,
or 1.19 percent, at 12,234.02, while the Standard & Poor's 500
Index <.SPX> climbed 13.67 points, or 1.04 percent, at
1,323.80. The Nasdaq Composite Index <> gained 28.50
points, or 1.04 percent, at 2,774.13.
Bank of America shares shot up 4.3 percent to $14.64, while
financials led gains on the S&P 500, with the S&P financial
index <,GSPF> up 2.3 percent.
In Europe, the FTSEurofirst 300 <> index of top
shares ended up 0.31 percent at 1,147.43 points, after
seesawing between positive and negative.
GREEK YIELDS AT RECORD HIGH
The euro fell against the dollar as concerns about the debt
situation of peripheral euro zone countries outweighed
expectations of an interest rate hike by the European Central
Bank next month.
Concerns about Europe's debt problems have been on the rise
since Moody's cut Greece's credit ratings by three notches on
Monday, signaling more downgrades are on the way.
Greece's borrowing costs spiked on Tuesday, with yields
paid by 10-year government bonds <GR10YT=TWEB> climbing to
12.946 percent, their highest since the launch of the euro
currency.
The euro <EUR=> fell 0.5 percent to $1.3906. It had climbed
to a four-month high above $1.40 on Monday after ECB president
Jean-Claude Trichet said last week that euro-zone interest
rates could rise as early as next month.
A rise in interest rates would push up borrowing costs
across the 17-country euro zone, increasing the cost of funding
for highly indebted countries.
"The problem with the interest rate-driven trade and
Trichet's hawkish comments is that you have to see the other
issues behind it," said John McCarthy, director of foreign
exchange at ING Capital Markets in New York. "Higher rates will
be devastating for the peripheral countries."
Despite the retreat in oil prices, tension in the Middle
East led investors to the perceived safety of U.S. government
debt, causing prices of 10-year bonds <US10YT=RR> to fall 6/32,
and driving their yield up to 3.5365 percent.
Safe-haven demand for U.S. debt also boosted investor
appetite for the $32 billion worth of three-year notes
auctioned by the Treasury on Tuesday.
Gold eased below $1,430 an ounce, falling further from
Monday's record high after the drop in oil prices eased some
concerns about inflation. Spot gold <XAU=> was last at
$1,425.00.
(Additional reporting by Wanfeng Zhou, Chuck Mikolajczak, Nick
Olivari, Brenda Goh and William James; Editing by Leslie Adler
and Andrew Hay)
