European stock markets mostly sank in late trade yesterday, snapping five days of gains as Opec got ready to open the taps, hitting heavily weighted oil stocks such as Shell, and as insurers suffered more losses.
Strong gains for Portugal Telecom and Telefonica helped Lisbon and Madrid buck the weaker regional trend.
But the discovery of a toxic poison in London by British anti-terrorist police gave investors a chilling reminder of the looming threat of war and of the prevailing security risks.
"Basically, it's given the market the wobbles," said one senior trader.
By 1648 GMT, with only Frankfurt still trading, the FTSE Eurotop 300 index was down 0.78 per cent at 883 points, with the DJ Euro Stoxx 50 index down 1.1 per cent at 2,502 points.
Losses were broad-based, with declining stocks outpacing climbers by more than three-to-one in below-average volume.
Bullish strategists, though, were in no mood to throw the towel in.
"My impression is that people are still making their minds up. I wouldn't write this off as a bad start to the year, even if volumes are down," said Kevin Gardiner, European equities strategist at Credit Suisse First Boston.
"Markets can rally this year, not least because the market's worst fears about global GDP growth may not come to pass now," he added, citing a recent pick-up in US manufacturer sentiment.
Oil stocks were whacked after Opec suggested producing countries may raise output by a hefty two million barrels a day.
France's TotalFinaElf fell 1.9 per cent, while Europe's two biggest companies BP and Shell slid between one and two per cent each.
Insurance was the biggest declining sector as investors continued to fret about the impact that the stock market's three straight years of decline has had on insurers' equity investment assets, after Britannic warned on profits on Monday.
Prudential sank 3.9 per cent, Germany's Allianz lost 3.5 per cent, and France's AXA fell 4.8 per cent.
The telecoms sector gained ground after Lehman Brothers upgraded the sector to 'overweight', although Vodafone fell back into the red after the British mobile phone giant dashed hopes for a more aggressive outlook and said there were no reasons to cut its full-year forecast.
Telefonica led the way up with a 5.77 per cent gain, as the Spanish market played catch-up after Monday's holiday. Portugal Telecom leapt 5.85 per cent.
Elsewhere, Sodexho Alliance fell 3.5 per cent ahead of its first quarter sales due out before today's market opening, amid talk of a possible cut in its organic growth target.
Airlines also remained under the cosh following Dutch KLM's profit warning on Monday, with Spain's Iberia down 3.25 per cent and Germany's Lufthansa off 3.3 per cent.
German retailers fell after the German statistics office released data showing retail sales fell sharply last November, well below analysts' expectations.
Metro fell 4.4 per cent, and Karstadt Quelle sank 4.7 per cent.
By contrast, Dutch retailer Ahold rose 2.75 per cent after posting full-year sales of €72.7 billion, up 9.2 per cent from 2001, and reaffirming its forecast for a decline of six to eight per cent in earnings per share in 2002.
On Wall Street, the Dow Jones industrial average was flat at 8,770 points, while the Nasdaq Composite gained 0.56 per cent to 1,429 points.
The gains came after the US Treasury confirmed details of the $670 billion stimulus package over 10 years that President George W. Bush was due to outline in a speech later.
The package would end taxes on shareholder dividends - a move that would benefit the stock market - and boost the economy by $20 billion, the Treasury said.
Hopes about such a package triggered a stocks rally on Monday.