A European share rally fizzled out, oil prices rose and the dollar held steady today as nervous markets looked to US President George W. Bush's State of the Union address for the next move in the Iraq crisis.
Safe-haven government bonds rose after earlier falls and gold, another shelter in turbulent times, was down but off session lows ahead of the US market opening.
Investors want Mr Bush to end uncertainty over whether the United States will strike Iraq. Washington has threatened a unilateral attack on Iraq if Baghdad does not give up banned weapons. Iraq denies it has any.
Markets were earlier buoyed by a slight rise in Germany's closely watched Ifo index of business sentiment, which rose for the first time in eight months in January. It edged up to 87.4, slightly below expectations, from a revised 87.3 in December.
However, stock market gains faded by the European mid-session. The FTSE Eurotop 300 index of pan-European blue chips was down 0.04 per cent at 1.00 p.m., and the narrower DJ Euro STOXX 50 index was down 0.07 per cent.
Wall Street looked set to open mixed after stock index futures gave up most of their earlier gains.
The Dow Jones Industrial average closed on Monday down 1.74 per cent at 7,989.56, its first close below 8,000 since mid-October. The tech-laden Nasdaq ended the session down 1.26 per cent. The dollar held nervously a cent above a three-year low against the euro. It was last at $1.0801 per euro after falling on Monday to lows beyond $1.09.
Gold headed lower in Europe after hitting a six-year high of $372.60 an ounce yesterday but made up some of the lost ground as stocks slipped and the dollar gave back some of its gains.
Oil prices rose - brent crude for March delivery was 29 cents higher at $30.15 a barrel and US light crude was up 37 cents at $32.66.