U.S. stocks were mixed on Tuesday while European shares snapped a three-day rally and oil slipped on fear central banks may not deliver enough stimulus this week to quell concerns about a global slowdown.
Equities and oil had been climbing steadily since European Central Bank President Mario Draghi said he would do whatever it took to save the euro. Markets interpreted that to mean the ECB could announce at its Thursday meeting plans to lower Spanish and Italian borrowing costs by buying those countries' bonds.
Signs of flagging growth in the United States had also raised hopes the Federal Reserve, which begins a two-day rate-setting meeting on Tuesday, will step up bond purchases of its own, though most economists expect it to hold fire until September.
"The markets have run ahead of themselves. And I think certainly the ECB and the Federal Reserve will hold back from pumping in more money at this point in time," said Manoj Ladwa, head of trading at TJ Markets.
Neither central bank is expected to stay on the sidelines for long, though, and that has helped pull the euro off recent two-year lows and take U.S. stocks to their best year-to-date rise since 2003.
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The euro was last up 0.3 percent at $1.2296, while U.S. government bonds also rose, with the benchmark 10-year U.S. note up 7/32 in price to yield 1.48 percent.
But some traders said the ECB may not be able to live up to market expectations, particularly if news from the debt-stricken euro zone continues to get worse.
Capital flight from Spain gathered pace in May while the central government's deficit widened, raising fears that the country may soon need a full-scale bailout.
"Everybody is waiting for Thursday to see if Draghi can deliver," said Lex van Dam, hedge fund manager at Hampstead Capital, which manages $500 million of assets. "He'd better pull a big rabbit out of his hat."
The safe-haven German bond market reflected the growing fears that whatever Draghi says at the bank's policymaking meeting is likely to disappoint markets.
European shares, which were heading for their best month since October after soaring more than 5 percent in the last three sessions, went into reverse, with the FTSE Eurofirst 300 index .FTEU3 down 0.9 percent.
Investors in European shares were also given pause by weaker-than-expected earnings from Deutsche Bank (DBKGn.DE) and other major banks. The region's ongoing debt crisis has hurt revenues.
In U.S. markets, the Dow Jones industrial average .DJI was down 15.82 points, or 0.12 percent, at 13,057.19. The Standard & Poor's 500 Index .SPX was down 0.93 points, or 0.07 percent, at 1,384.37. The Nasdaq Composite Index .IXIC was up 4.51 points, or 0.15 percent, at 2,950.35
In the United States it's been a slightly better story. With 294 of S&P 500 companies having reported earnings, 67 percent have beaten analysts' expectations, with another 10.9 percent in line with forecasts and 22.1 percent below.
In a typical quarter 62 percent of companies beat estimates, 17 percent match and 20 percent miss estimates, according to Thomson Reuters data.
But incoming economic data has painted a mixed picture at best. A fourth straight monthly rise in U.S. single-family home prices offered some encouragement Tuesday, though a fall in inflation-adjusted spending in June underscored the economy's loss of momentum as the second quarter ended.
"Consumers are afraid," said Matthew Lifson, analyst at Cambridge Mercantile Group in Princeton, New Jersey. "This data suggests the U.S. economy is stagnant overall and it's just muddling."
That should keep future Fed action in focus, analysts said.
A separate report showed consumer confidence rose unexpectedly this month.
Commodity markets are increasingly concerned about the health of the global economy as Europe's sovereign debt crisis, a slowing China and sluggish activity in the United States weigh on demand.
Major Asian exporters Japan, South Korea and Taiwan added to the deepening signs of economic stress on Tuesday.
But commodities and the growth-linked Australian dollar got some support from an official Xinhua news agency report quoting Chinese Premier Wen Jiabao as saying that China would increase fiscal and monetary policy support to the economy in the second half of the year.
Brent crude was down 99 cents at $105.21 a barrel, while U.S. crude was down $1.10 at $88.68 a barrel.
Brent has had a strong July, rising 8 percent for its biggest monthly gain since February.
Spot gold rose $1.15 to $1,621.60 an ounce in muted trade ahead of the ECB meeting. Prices were on track for a 1.5 percent gain this month, its second straight monthly rise.