Stocks, dollar stabilise after battering

World stocks stabilised on Wednesday above a 21-month low while the dollar held near a record trough versus the euro after a sharp fall in oil prices helped calm investor nerves over the financial sector.
Oil posted its biggest one-day drop on Tuesday since 1991 when prices tumbled at the start of Operation Desert Storm. This helped support investor sentiment battered by concerns that the credit crisis could spur more bank failures.
Such fears, prompted by troubles in U.S. mortgage firms, intensified after Federal Reserve chief Ben Bernanke said financial markets remained under considerable stress and the economic and inflation outlook was unusually uncertain.
Selling pressures on risky assets eased somewhat after U.S. securities regulators issued an emergency rule on Tuesday to limit certain types of short selling in major financial firms in the latest effort to clamp down on market manipulation that some blame for the sharp declines in financial stocks.
"Technical bounces might occur but we have seen over the last couple of weeks there have been a lot of invitations to do that… I would not be too optimistic that this will be a really big relief rally," said Gerhard Schwarz, head of global equity strategy at UniCredit.
"The outlook for the financial space remains bleak. The situation is certainly still very much stretched and we have seen that there is no quick fix for that."
The FTSEurofirst 300 index was up 0.2 percent while MSCI main world equity index was steady on the day, holding just above the previous day's low.
The dollar stood at $1.5935 per euro after falling as low as $1.6038 on Tuesday.
The rule on short selling issued by the U.S. Securities and Exchange Commission will go into effect on Monday, July 21.
"This SEC story is something that the market is focusing on, and if it actually proved successful in stabilising the financials, it will also help stabilise the dollar," said Paul Mackel, strategist at HSBC.
"But the dollar is still on a knife edge and the sentiment is still very, very poor."
Emerging sovereign spreads tightened 1 basis point while emerging stocks fell 0.15 percent.
The September Bund future rose 5 ticks, underpinned by investor jitters over the economy.
U.S. light crude fell a quarter percent to $138.38 a barrel after dropping as low as $135.92, posting its biggest one-day drop since 1991 when prices tumbled at the start of Operation Desert Storm.
Gold ticked higher to $974.30 an ounce.