Concerns about the US economy and banking sector woes gnawed at investor confidence today despite a better-than-expected German business sentiment report, keeping stocks and the dollar under pressure.
But a weakening greenback helped fuel interest in a range of commodities including oil, gold and industrial metals that had sold off recently.
A Deutsche Bank warning that credit market aftershocks could hit its 2008 profits and data on Tuesday showing US consumer confidence dropping to a five-year low in March conspired to keep investors cautious.
Adding to the gloom, fresh US data today showed new orders for long-lasting US manufactured goods unexpectedly fell 1.7 per cent in February, reinforcing worries about the world's biggest economy.
Wall Street looked set to open lower with major stock index futures all trading in the red.
"There definitely is still nervousness in the banking sector and the announcement from Deutsche bank served as a reminder that JPMorgan raising its bid for Bear Stearns doesn't necessarily solve all the problems for the financial sector," said Sean Maloney, fixed-income strategist at Nomura in London.
News early this week that JPMorgan had boosted its takeover offer for Bear Stearns by about fivefold had sparked a rally in financial stocks globally and eased worries about a sector constrained by a credit crunch.
The FTSEurofirst 300 index of top European shares slid 0.9 per cent, while Germany's DAX fell 0.7 per cent with Deutsche Bank about 2 per cent lower.
London's FTSE 100 index shed 0.7 per cent, weighed by a near 7 per cent fall for Swiss miner Xtrata after takeover talks with the world's largest iron ore miner Vale broke down.
At 1pm the Dublin market was off 1.2 per cent at 6247 points as the leading banks fell back due to profit-taking after yesterday's strong gains.