European and U.S. stock markets fell modestly Tuesday as investors were spooked by an unexpected drop in U.S. consumer confidence and braced for quarter-end trading volatility.
The FTSE 100 index of leading British shares was down 20.77 points, or 0.5 percent, at 4,273.26 while Germany's DAX fell 28.96 points, or 0.6 percent at 4,856.13. The CAC-40 in France was 9.04 points, or 0.3 percent, lower at 3,184.64.
On Wall Street, the Dow Jones industrial average was down 24.71 points, or 0.3 percent, at 8,504.67 soon after the open while the broader Standard & Poor's 500 index fell 3.96 points, or 0.4 percent, to 923.27.
The modest selling was stoked by the New York-based Conference Board's report showing its Consumer Confidence Index dropped to 49.3 from a revised 54.8 in May. Economists had been expecting a modest increase following two straight monthly rises.
The consumer confidence reading dented hopes that the world's largest economy is on the mend and comes as investors await a raft of other important economic news over the rest of the week.
Thursday is at the forefront of investors' attention as it brings the European Central Bank's latest interest late decision and the closely watched U.S. non-farm payrolls. Analysts expect June's U.S. unemployment rate to rise around 0.3 of a percentage point to 9.7 percent _ President Barack Obama has warned that it will top 10 percent in the coming months.
Equities rose from the middle of March until the start of June on hopes that the U.S. economy in particular will recover from recession sooner than anticipated. Many investors saw fallen stocks as cheap and started buying into the market. However, a run of downbeat economic news brought an abrupt end to the rally and altered the general mood prevailing among investors.
Tuesday's news that the recession in Britain is even deeper than previously thought did little to alter the prevailing view in the markets that any recovery around the world will be a long, hard slog.
The U.K. office for National Statistics said gross domestic product fell 2.4 percent in the first quarter from the previous three month period, way more than the previous prediction of a 1.9 percent decline.
Renewed strength in oil prices, which powered to eight-month highs above $73 a barrel for a brief while, is considered a potential brake on economic recovery. Though higher oil prices can boost the earnings of oil companies, they have the capacity to rein in any recovery in consumer spending and stoke inflationary pressures.
By early afternoon London time, benchmark crude oil for August deliver was up 2 cents to $71.51 a barrel.
So far, however, falling prices remain at the forefront of central bankers' concerns. Figures earlier showed that prices in the 16 countries that use the euro fell 0.1 percent in the year to June, the first negative inflation rate in at least a decade.
Investors were also bracing themselves for potential volatility later as Tuesday marks the last day of the month, quarter and half-year. The coincidence of these fiscal period ends can create volatility as investors book profits, stake out new positions or alter their hedging strategies.
"The month and quarter-end could also see many traders out there looking to book whatever profits they can, again reigning in the upside potential," said Matt Buckland, a dealer at CMC Markets.
During June, stock markets in the developed world gave up around 5 percent of the gains that they had made since March and investors will be looking to see if this week's economic data can boost sentiment and renew the rally. Despite the recent losses, the S&P, for example, is up over 16 percent since the quarter began, its best quarter since the fourth quarter of 1998.
In Asia, Japan's Nikkei 225 rose 174.97 points, or 1.8 percent, to 9,958.44, while Hong Kong's Hang Seng reversed early gains to close down 149.78, or 0.8 percent, at 18,378.73.
Elsewhere in Asia,South Korea's Kospi inched up 0.1 percent to 1,390.07 while Australia's benchmark rose 1.8 percent,
Singapore's market gained 0.4 percent but China's Shanghai index dropped 0.5 percent
Meanwhile, the dollar rose 0.2 percent to 96.29 yen while the euro fell 0.2 percent to $1.4048.
AP Business Writer Stephen Wright in Hong Kong contributed to this report.