World stocks held above a recent 11-month low on Monday while oil prices slipped as investors concerned about a global economic downturn stayed away from buying risky assets.
European shares did bounce back up as hopes of an end of conflict in Libya pushed energy shares higher and a recent sharp sell-off encouraged investors back into the market.
But investors were in no mood to aggressively buy risky assets. Persistent worries that the sovereign debt crisis in euro zone peripheral countries may spread to bigger regional economies also kept safe-haven flows into gold, which hit another record high .
The benchmark MSCI world stocks has now fallen five weeks in a row and is on track for the worst monthly performance since October 2008, a period of global market turmoil after the collapse of Lehman Brothers.
"I am sure that there are some bargain hunters active in the market. Equities might gain some momentum as the week progresses," said Mike Lenhoff, chief strategist at Brewin Dolphin.
"But if the market has to sustain the rebound, it has to have some cyclical sectors such as banks and mining behind it. Defensives tend to steady the markets, but I am not sure that they help to lead to a sustainable path for a rebound."
The MSCI world equity index fell 0.7 percent at one point before erasing most of losses. European stocks were up 1.2 percent, encouraged by a 0.8 percent rise in U.S. stock futures .
Emerging stocks lost half a percent with losses led by Shanghai shares which hit a 13-month low.
"A bigger concern is a slowdown in China's economy. We haven't reached that stage yet, but the equity market could be pricing that in, just in case," said Lee Wee-Liat, regional head of property at Samsung Securities.
U.S. brent oil fell more than 2 percent. On top of a weak economic outlook, the potential for a restart of Libyan oil flow into the market if the Gaddafi regime collapses also weighed on prices.
Bund futures fell 9 ticks.
Gold hit a third consecutive all-time high near $1,900 an ounce, after staging its biggest weekly gain in 2-1/2 years last week.
The euro rose 0.3 percent. The dollar held above a record low around 75.94 yen hit on Friday, thanks to concerns about intervention by Japanese authorities.
The U.S. currency fell 0.1 percent against a basket of major currencies.
Investors are waiting for signs of further stimulus from the Federal Reserve when bankers gather in Jackson Hole, Wyoming, late this week, one year after Chairman Ben Bernanke launched a second round of quantitative easing to revive the economy.
Additional bond purchase by the Fed could help reflate asset prices, but many view the chances of a third round of quantitative easing as limited and expect the Fed to take gradual measures to boost the economy.