GLOBAL MARKETS-Sky-high oil cuts share losses; euro near record

By Veronica Brown

LONDON, April 22 (Reuters) - Surging oil cut stock market losses on Tuesday as resources took some sting out of bank stress from a Royal Bank of Scotland rights issue, with record crude also helping shove the euro towards record highs.

RBS (RBS.L) fell 3.2 percent after announcing a record 12 billion pound rights issue to cover a potential 5.9 billion pound writedown on the value of toxic assets and help to rebuild a stretched balance sheet.

Although the rights issue was broadly in line with expectations, banking worries stayed at the forefront of investors' minds after softer than expected results from Bank of America Corp (BAC.N), the biggest U.S. retail bank.

Banks are under pressure to reveal the full extent of their writedowns on assets linked to the crumbling U.S. housing market with recent economic data pointing to an economy on the brink of, if not already in, recession.

"As this (RBS issue) could be the first in a string of capital raising moves by European banks, attention could turn to the next likely candidate," said Stephen Surpless, senior analyst at Cantor Fitzgerald in London.

But while financials suffered due to nagging uncertainty over the impact of the crisis in credit markets, oil topped the $118 a barrel mark to hit a record high CLc1.

The surge in oil helped lift commodity-related stocks, offsetting some of the financial-led losses to leave FTSEurofirst 300 Index largely flat on the day .FTEU3.

The earlier fall in European shares mirrored a weaker tone in Asia overnight after Tokyo's Nikkei Index closed down 1.1 percent.

U.S. stock market futures were pointing to a mixed open later, with earnings focus turning to non-financials and results from Yahoo, AT&T and Mcdonalds.

Meanwhile, money markets were digesting a plan announced this week by the Bank of England to ease strain in UK mortgage markets.

The interbank cost of borrowing three-month sterling funds inched lower, while three-month dollar lending rates stabilised after rising sharply last week, according to the latest daily fixings from the British Bankers' Association.

Meanwhile, the cost of borrowing three-month euro funds rose to the highest level since mid-December [nL22094252].

EURO NEARS HIGHS

The impact of surging oil prices spread into currency markets as the euro rallied towards recent record highs.