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 European equities gave up early gains, with commodities stocks the
hardest hit, as U.S. crude fell more than $1 to $44.39 a barrel.
Brent crude was down 89 cents to $48.67.
There had been some early relief after Chinese stocks managed to
bounce from steep losses and end the day flat, following fresh
supportive measures from brokerages eased investor fears of a
trading crackdown from Beijing.
Benchmark indexes in Paris, Frankfurt and Milan were broadly flat
and outperforming a slightly negative European market at 0842 GMT.
"Trader and investor nerves are a bit fragile at the moment...People
are just unsure at the moment of whether this is a good buying
opportunity or not," said Paul Chesterton, a trader at brokerage
Peregrine & Black.
A recent surge in financial market volatility, driven by fears over
China's economic slowdown and its impact on world growth, has seen
the Chinese central bank pump cash into the economy and also fueled
bets that the U.S. Federal Reserve will delay raising interest rates
as early as this month.
With the European Central Bank's policy meeting due on Thursday,
traders said there were growing expectations for a dovish stance in
the wake of the market turmoil. The ECB launched its bond-buying
scheme, or quantitative easing, this year and it has pledged to
intervene further if needed.
"Investors are keenly awaiting (ECB President Mario) Draghi's press
conference tomorrow and a lot of investors are not taking major
positions ahead of that," said RIA Capital Markets strategist Nick
Stamenkovic.
"The likelihood is that he is going to adopt a dovish posture given
the rising global headwinds and the market will pay particular
attention to the inflation forecasts for 2016 and 2017."
German 10-year yields, the benchmark for euro zone borrowing costs,
were 1 basis point lower at 0.79 percent. Yields on other top-rated
bonds were down by a similar amount.
The U.S. dollar rose and took the heat out of a rush to unwind carry
trades that boosted the safe-haven yen and the low-yielding euro in
recent weeks.
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"There has been a moderation in risk aversion with European stocks
and Wall Street stock futures in the green. That has seen the yen
give up some of its recent gains," said Alvin Tan, currency
strategist at Societe Generale.
"U.S. payrolls will be the focus, but I doubt it will change the
current debate over whether the Federal Reserve will hike rates in
the near term or not."
Emerging market stocks fell for the third straight day, down half a
percent and approaching recent 6-year lows while the rouble extended
the previous session's 3.8 percent fall against the dollar which was
the biggest one-day loss in three months.
Asian shares fell for a third straight day on Wednesday as weak
manufacturing reports from China, the United States and Europe
fueled worries about slowing global growth.
(Reporting by Lionel Laurent; Editing by Toby Chopra)
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