World stocks stabilised on Thursday near a three-week low hit a day earlier after investors turned nervous in pushing risky assets further before seeing concrete signs of an economic recovery.
Concerns over the banking sector grew after Standard & Poor's cut its credit ratings on 18 U.S. banks on Wednesday, saying increased regulation and market volatility will hurt the already weakened sector.
"The correction started a few sessions ago will continue for a while. The trend is now downward," said Alexandre Le Drogoff, technical analyst at Aurel BGC in Paris.
The MSCI world equity index was steady on the day, having hit a three-week low on Wednesday.
The benchmark index has risen by about 40 percent since March.
"The rally has been remarkably smooth and fast. As a result, we would argue that there is a high likelihood of some profit-taking and some sort of near-term correction that would allow the market to catch its breath before moving noticeably higher," Bob Doll, chief investment officer at BlackRock, said in a note to clients.
"On balance, we expect that stocks will continue to grind higher over the course of 2009, but not without some fits and starts along the way."
The FTSEurofirst 300 index was steady while emerging stocks were off by 0.4 percent.
Chinese stocks posted their highest close in nearly 11 months led by coal and financial shares as optimism grew for prospects for economic recovery.
The World Bank in its quarterly update on China raised its forecast for economic growth this year to 7.2 percent from 6.5 percent projected in March, although that remains below the official target of 8 percent.
U.S. crude oil rose half a percent to $71.41 a barrel.
The dollar fell 0.1 percent against a basket of major currencies while the yen fell a quarter percent to 95.90 per dollar.
The Swiss franc fell briefly after the Swiss National Bank said it would act determinedly to prevent the currency appreciating against the euro.
The Swiss central bank left its target band for the three-month Swiss franc LIBOR at 0.00-0.75 percent after its quarterly policy meeting.
The currency fell as low as 1.5118 per euro, before recovering to 1.5043 after the central bank said it had been successful in stemming the currency's rise against the euro.
The September bund futures fell 18 ticks.
