Oil prices eased from record highs on Tuesday, boosting shares in Europe and Asia, and the dollar touched its strongest levels in months due to an increasingly hawkish U.S. interest rate outlook.
Allied Domecq stood out among Europe's share gainers after the British drinks group said it was discussing a possible takeover bid by Pernod Ricard.
U.S. crude oil futures slid to around $56.55 a barrel from Monday's all-time high of $58.28 as speculators took profits following year-to-date gains of more than 30 percent, encouraged by the prospect of rising U.S. crude stocks and OPEC supplies.
Traders said the underlying trend was still bullish.
"$60 is still within easy reach, all we need are some bad U.S. inventory figures or a refining outage," said David Thurtell, a commodities strategist at Commonwealth Bank of Australia in Sydney.
The dollar touched a five-month high against the yen of 108.89 and a two-month peak versus the euro of $1.2799, before steadying, as traders latched onto the idea that an inflation-wary Federal Reserve might tighten more aggressively.
A speech from Fed chief Alan Greenspan due at 1750 GMT, on energy, was seen offering potential clues on the likely direction of U.S. monetary policy.
"Cyclical factors are very heavily in the dollar's favour at the moment and many people are anticipating Greenspan to sound more hawkish," said Adam Cole, senior currency strategist at RBC Capital Markets.
The yield differential on the U.S. currency was seen increasing, with base rates currently at 2.75 percent in the United States, 2.00 percent in the euro zone and virtually zero in Japan, and the Japanese and euro zone economies too weak to support rate rises.
The weaker euro weighed on bonds and boosted benchmark euro zone yields after these fell to a 6-week low on Friday on data which cast a cloud over regional growth prospects following a near-recession in 2004.
Yields on 10-year euro zone government bonds were at around 3.60 percent. Comparable U.S. Treasuries yielded around 4.475 percent, largely unchanged on late New York levels, as traders awaited Greenspan.