Europe halted a slide in stocks today keeping alive some momentum from the bailout of US mortgage firms Fannie Mae and Freddie Mac.
World stocks posted their biggest gains yesterday since the rescue of Bear Stearns in March after Washington seized control of the two mortgage firms, whose losses have weighed on the US housing market and threatened to damage the financial system.
Optimism faded in Asia, where the benchmark equity index fell, and caution returned to currency markets where investors cut back on risk and bought the low-yielding yen and the dollar.
However, European stocks extended gains, helped by lower oil prices. UK equities rose more than 1 per cent after technical trouble had halted trading on the London Stock Exchange for several hours yesterday.
US light crude fell 1.4 per cent to $104.89 a barrel, hitting a five-month low, while gold slipped to $799.70 an ounce.
Investors view the bailout of the two mortgage firms as positive, although doubts remain about how it would solve underlying credit problems faced by many banks and stem the flow of data pointing to a deep economic slowdown.
US stocks fell in choppy trade after opening today as a drop in oil prices dragged shares of energy companies lower and investors worried again about the economy's health.
A report showing an unexpectedly steep drop in pending sales of existing US homes in July added to the negative tone.
On the financial services front, shares of Lehman Brothers dropped more than 31 per cent as investors fretted about the investment bank's efforts to raise capital.
The Dow Jones industrial average was down 94.37 points, or 0.82 percent, at 11,416.37. The Standard & Poor's 500 Index was down 17.97 points, or 1.42 per cent, at 1,249.82. The Nasdaq Composite Index was down 13.88 points, or 0.61 per cent, at 2,255.88.