Stocks rose in Europe on Tuesday lifted by a recovery in oil prices but after a slump in crude to a fresh 12-year low and a dramatic surge in offshore Chinese yuan deposit rates had earlier rattled investors.

Weak British industrial production figures were the latest in a line of economic data that suggests interest rates in the developed world may not rise as quickly as had been thought. The prospect of easier central bank policy for longer also supported the stock bounce.

A rally in the European retail sector led by strong seasonal updates from British companies pulled the FTSEuroFirst 300 up from a three-month low. The index was last up 1.5 per cent on for its biggest rise in over two weeks.

US futures pointed to a rise of around 0.5 per cent at the open on Wall Street having earlier indicated a fall of around 0.3 per cent.

"There is a notion perhaps misplaced that oil may find a floor at present levels as it's already down 17 per cent so far this year" said Brenda Kelly head analyst at London Capital Group. "The cheap and easy money is not here to stay but it seems it may be here for some time yet. A combination of bargain hunting and technical buying is also contributing."

At 1230 GMT Britain's FTSE 100 was up 1.6 per cent and Germany's DAX and France's CAC 40 both rose 2.1 per cent.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.3 per cent and was just shy of its lowest level in four years. It is down more than 9 per cent since the start of 2016. Japan's Nikkei closed 2.7 per cent lower at its lowest level in almost a year.

With investors still licking their wounds from last year's plunge in global commodity prices and a sharp sell-off in Chinese markets 2016 has brought more pain for investment portfolios in the form of a deepening slowdown in the global economy and volatile Chinese markets. Beijing set another firm fix for its currency eliminating the gap between offshore and onshore yuan exchange rates. This was done by encouraging state banks to buy up yuan in Hong Kong driving up the overnight deposit rate fixing to 66.8 per cent.

"China is continuing to instil a degree of stability after the sharp volatility at the beginning of the month by announcing stable to firmer fixings" said Mitul Kotecha currency strategist at Barclays in Singapore. "Tighter liquidity has contributed to a squeeze on long USD/CNH positions and will mean investors are wary of shorting CNH in the near term" he said.

Sterling was the big mover in currencies falling below $1.45 for the first time since June 2010 after figures showed UK industrial production surprisingly fell in November at the fastest pace in almost three years. The pound was last down 0.8 per cent at $1.4420. Economists at JP Morgan pushed back their forecast for the Bank of England's first post-crisis rate hike by six months to November 2016.

The US dollar recovered ground against the euro and yen trading at 117.75 yen while the euro was changing hands at $1.0855.

Money market futures are starting to price out the chance of multiple rate hikes by the Federal Reserve this year with only a roughly 50 per cent chance of a second hike priced in. At the start of the year futures were fully pricing in two rate increases.

Indian stocks extended losses from a 19-month low as lenders retreated after IndusInd Bank Ltd and Federal Bank Ltd reported increases in bad loans. The Sensex slid 0.6 per cent to the lowest close since May 2014.