Fears of a global recession and persistent concerns about the banking sector lifted the U.S. dollar on Monday as global stocks mostly faltered and oil prices shot higher on expectations of another OPEC output cut.

Government debt prices fell as U.S Treasuries retreated on the prospect of $63 billion in new supply this week and shorter-dated euro zone bonds slipped ahead of 8 billion euros worth of two-year paper from Germany on Wednesday.

Crude oil rose above $47 a barrel at one point after renewed buying on speculation the Organization of Petroleum Exporting Countries may cut production again at its meeting on Sunday in Vienna.

Equity markets in Europe and the United States were choppy as higher energy prices pulled up oil shares while U.S. bank shares rose on optimism that Washington will provide more clarity on government plans to shore up the U.S. banking system.

U.S. Federal Reserve Chairman Ben Bernanke was attending a meeting on the economy with President Barack Obama, the White House said.

But in Europe, financials took the most points off the FTSEurofirst 300 index of top European shares as investors continued to flee the financial sector following news of further government stake-building, fanning worries about the stability of Britain’s banks.

Growing fears about the ailing U.S. automakers and banking drove interbank U.S. dollar borrowing costs up.

In Asia, Japan’s Nikkei average closed at a 26-year low, finishing down 1.2 percent, and other Asian markets slipped on worries about the fate of General Motors and U.S. banks.

“The dollar seems to be the only safe haven left right now, with both the yen and Swiss franc under pressure,” said Robert Blake, senior currency strategist at State Street in Boston.

“We’re certainly in risk aversion mode and the trade right now is to buy dollars, which to a large extent reflects huge repatriation flows to the United States.”

Currencies have tracked equity markets’ performance over the last few weeks, with the dollar tending to benefit when stocks fall as investors seek shelter amid fears of a collapse of banking systems worldwide.

The dollar was up against a basket of major trading-partner currencies, with the U.S. Dollar Index up 0.53 percent.

The euro fell 0.12 percent at $1.2625, while against the yen, the dollar rose 0.50 percent at 98.86.

With the outlook so dim, Barclays cut its year-end target for the S&P 500 to 760, saying the probability of the benchmark U.S. stock index hitting an initial 875 was much lower now.

After 1 p.m., the Dow Jones industrial average was down 62.76 points, or 0.95 percent, at 6,564.18. The Standard & Poor’s 500 Index was down 4.35 points, or 0.64 percent, at 679.03. The Nasdaq Composite Index was down 18.56 points, or 1.43 percent, at 1,275.29.

The biggest drag on the Dow was Merck & Co Inc after its proposed $41 billion takeover of Schering-Plough raised concerns about the depth and breadth of the recession as it hurts such defensive sectors as drugmakers, analysts said.

“This deal was done in a declining environment for both companies,” said Arthur Hogan, chief market analyst at Jefferies & Co in Boston.

The FTSEurofirst 300 index of top European shares closed down 0.7 percent at 657.30 points.

The benchmark 10-year U.S. Treasury note fell 6/32 in price to yield 2.90 percent. The 2-year U.S. Treasury note fell 3/32 in price to yield 0.99 percent.

U.S. light sweet crude oil rose 94 cents to $46.46 a barrel.

OPEC Secretary-General Abdullah al-Badri said the 12-member producer group would consider reducing output again at its meeting on Sunday as it tries to counter downward pressure on oil prices from falling demand.

“All options are on the table,” he told reporters in Qatar when asked if OPEC, which pumps more than one-third of the world’s oil, would announce another reduction in supply at its meeting in Vienna.

Spot gold prices fell $18.90 to $917.65 an ounce.

March 9 (Reuters)