Equity markets struggled to maintain early gains Wednesday and were mixed in later trade despite a strong rebound in New York, with optimism over the global economy and concerns about the fast-spreading Delta variant fuelling volatility.
Investor confidence -- built on months of vaccinations, and vast government and central bank support -- has been knocked in recent weeks by surging infections around the world that have forced new lockdowns and containment measures while putting the global recovery at risk.
That has culminated in big losses for equity markets, which have been sitting at record or all-time highs, as dealers shifted into havens such as Treasuries, gold and the yen.
Blame has largely fallen on the highly transmissible Delta variant, which has spread like wildfire through countries, including those with high vaccination rates. But the main worry is for those that are struggling to inoculate their populations fast enough.
And the head of the World Health Organization warned Wednesday that the pandemic was "a test the world is failing".
However, analysts said that while the near-term picture was bleak, sights were set on the recovery outlook and that market losses were to be expected.
"We had a dip, we had a shock, there is fear of the Delta variant and there is the other side -- which is some day we get beyond Covid and when we do, we have a worldwide recovery," David Kotok, of Cumberland Advisors, told Bloomberg Television.
"We are seeing that tension going on in the markets for the last few days."
All three main indexes on Wall Street closed up more than one percent Tuesday but Asia struggled to make as much progress.
Tokyo, Shanghai, Sydney, Wellington and Jakarta all rose but Hong Kong, Seoul, Taipei, Manila and Bangkok fell with Singapore barely moved.
London, Paris and Frankfurt all rose at the open, extending Tuesday's rallies of more than one percent.
Oil prices retreated on demand fears stoked by the rising infection rates, while American Petroleum Institute data indicating a surprise increase in US inventories last week added to market malaise.
That has coupled with news this week that OPEC and other major producers had finally agreed to lift output to address warnings that there could be a supply crisis caused by the economic recovery and people returning to their daily lives.
"If official US crude inventories were to rise (Wednesday), instead of fall by a forecast 4.5 million barrels, oil prices could be vulnerable to further losses," warned OANDA's Jeffrey Halley.
"Indeed, oil remains very susceptible to intraday swings in risk sentiment and will remain so for the rest of the week."