World stocks slipped on Tuesday, despite emerging market gains, while the euro recovered on expectations of higher interest rates.

Portugal's debt remained under pressure, with yields on its 10-year bonds near record levels above 8 percent, complicating the country's attempts to avoid a European Union bailout.

World stocks as measured by MSCI were essentially flat to slightly lower, but the emerging market component gained more than a quarter of a percent.

Price drops on Monday enticed bargain-minded investors ahead of the end of the first quarter on Thursday.

Some investors concluded now it's an opportunity to pick up some shares, said Shane Oliver, head of investment strategy at AMP Capital Investors in Sydney. The broad trend is up and dips are being bought.

Europe was lower, however, with the FTSEurofirst 300 down 0.4 percent. Volume has begun to fall on European bourses in line with 2011 lows on Wall Street.

Some of this may reflect continuing uncertainty about how the Japan disaster, turmoil in the Arab world and global monetary policy will play out. But it could equally be a case of locking in Q1 profits.

Overall, investors are interpreting what they have seen in recent weeks as reasonably positive, said Keith Bowman, equity analyst at Hargreaves Lansdown.

Investors have generally focused on the improving world economy, but the crises and worries about inflation may be taking some toll.

German consumer sentiment fell for the first time in 10 months going into April as concern about global issues and inflation hit households.

The forward-looking GfK consumer sentiment indicator, based on a survey of 2,000 Germans, predicted a fall to 5.9 in April from 6.0 in March -- but this was still slightly above the 5.8 expected by 27 economists polled by Reuters.

EURO

The euro rose against the dollar, buoyed after comments by European Central Bank President Jean-Claude Trichet reinforced expectations for a rate rise next month.

The single currency had dipped on Monday after hawkish U.S. policymaker comments lifted the dollar, but it failed to break below $1.40 before it moved back up as Trichet said inflation was durably above the ECB's target.

Investors continued to focus on the prospect of higher rates and continued to shrug off the euro zone debt crisis, with concerns rising about Portugal's ability to finance itself as the country prepared for a snap election.

The euro was up 0.4 percent at $1.4135.

German government bonds opened slightly higher but Portuguese debt remained under pressure.

(Additional reporting by Atul Prakash, Jessica Mortimer and Richard Leong; Editing by Hugh Lawson)

Portugal Japan