Global shares slid and the euro wavered on Monday after the European Central Bank sought to squash speculation about the form of market intervention to contain the euro zone debt crisis, damping investor enthusiasm for risk.
German magazine Der Spiegel said over the weekend that the ECB was considering buying debt issued by member countries if their interest rates became too elevated, but a bank spokesman said it was misleading to report on yet-to-be decided matters.
Germany's central bank, the Bundesbank, also on Monday reiterated its opposition to bond purchases, and a spokesman for the German Finance Ministry said it was not aware of any plans for the ECB to target bond spreads.
A recent rally in global equities last week pushed the FTSEurofirst 300 index of top European shares to a 13-month peak and lifted the S&P 500 to nearly four-year highs on hopes the ECB would finally cap the two-year-old debt crisis.
Wall Street pared earlier losses to trade only slightly lower late in the session, though the S&P 500 remained near a four-year high.
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The Dow Jones industrial average was down 3.41 points, or 0.03 percent, at 13,271.79. The Standard & Poor's 500 Index was down 1.13 points, or 0.08 percent, at 1,417.03. The Nasdaq Composite Index was down 4.95 points, or 0.16 percent, at 3,071.64.
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In Europe, the FTSEurofirst 300 closed down 0.5 percent at 1,104.86 points.
MSCI's all-country world stock index and its emerging market index both were off about 0.1 percent.
European shares initially rose on the Der Spiegel report that the ECB is considering setting interest rate thresholds for the purchase of euro zone sovereign debt, a move that would discourage speculation.
"We are fishing in the fog at the moment so we need to see some more of the meat regarding the ECB's plans," said Heinz-Gerd Sonnenschein, equities strategist at Germany's Postbank.
Spanish sovereign bonds rallied as traders focused on the prospect of the ECB's intervention in debt markets to help contain the borrowing costs of troubled sovereign debtors.
Investor optimism has improved in recent weeks, said Bruce Bittles, chief investment strategist at Baird, saying that "could be problematic given that sentiment is approaching extreme optimism at a time when the seasonal headwinds begin to surface."
The euro traded near break-even at $1.2345.
The U.S. Dollar Index was down 0.2 percent at 82.468.
The euro's slide is expected to be limited, with the chance of the ECB taking action once the summer holiday season ends leaving investors wary of aggressively selling the currency.
"There are back and forth comments regarding ECB actions keeping the euro under pressure," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. "All of this is taking place against the subdued late summer trading backdrop so I wouldn't read too much into any of this."
U.S. Treasury prices also see-sawed near break-even as weakness in stocks bolstered the safe-haven appeal of U.S. government debt.
The benchmark 10-year U.S. Treasury note was down 1/32 in price to yield 1.8157 percent.
Oil prices also retreated, even though Brent pared losses to briefly rebound at one point, supported by curbs on North Sea output.
Brent for October delivery settled down 1 cent at $113.70 a barrel.
U.S. light sweet crude oil fell 4 cents to settle at $95.97 a barrel.
