Stock markets diverged on Tuesday as dealers mulled fears the Federal Reserve would push interest rates higher than expected and for longer as it battles stubbornly-high inflation.
Oil prices rebounded, while the pound extended gains won on Brexit deal alterations aimed at smoothing some trading obstacles between the UK and the European Union.
Prime Minister Rishi Sunak and European Commission president Ursula von der Leyen on Monday agreed a sweeping overhaul of trade rules in Northern Ireland, which borders EU member Ireland.
Asia and Europe struggled to track overnight advances on Wall Street ahead of further US economic data due this week.
Recent figures showing a robust US jobs market and inflation not coming down as quickly as hoped have spooked traders this month as they bet on more US interest rate hikes, wiping out most of January's equities rally.
"It hasn't been the most thrilling start to the week but that didn't stop investors from piling back into stocks on Monday in the hope that January data proves to be an anomaly," said Oanda analyst Craig Erlam. "That enthusiasm didn't flow through" to Tuesday, he added.
Principal Asset Management analyst Seema Shah cautioned that it was "increasingly clear" that the Federal Reserve "is not yet finished with rate hikes". "Relentless monetary tightening will eventually weigh on both the economy and earnings – a headwind that will, inevitably, renew and extend the equity market drawdown," she cautioned.
Relentless monetary tightening will eventually weigh on both the economy and earnings – a headwind that will, inevitably, renew and extend the equity market drawdown- Principal Asset Management analyst Seema Shah
London stocks were weighed down on Tuesday also by poor results from online supermarket Ocado. Ocado shares slumped 7.6 per cent to 577.20 pence in midday trade, topping London's fallers after revealing it doubled losses last year as customers cut spending in response to rising prices.
Elsewhere, Frankfurt and Paris edged higher in early afternoon deals.