US stocks initially posted their sharpest rally of the year in Tuesday morning trading after investors looked for bargains a day after Wall Street's worst performance in four years. The Dow was first up well over 2 percent for much of the day, with the Nasdaq index gaining more than 3 percent at one point.

But US stocks ended the trading day lower as the morning rally fizzled. The Dow lost 1.3 percent, with the Nasdaq index of technology stocks down 0.4 percent.

In Europe's trading sessions, the pan-European FTSEurofirst 300 index rose roughly 4 percent percent, a day after dropping 5.4 percent amid panic selling in China and around the world. The eurozone's blue-chip Euro STOXX 50 index also regained much of its losses from the day before by climbing 4.5 percent.

Germany's DAX stock market recovered 4.97 percent on Tuesday after losing 4.5 percent the day before, which some analysts had begun referring to as 'Black Monday.'

The FTSE 100 in London rose by 3.09 percent and the CAC 40 in Paris was up 4.14 percent, despite further losses in Shanghai, which only exacerbated concerns about the state of China's weak economy.

China fears

In Tuesday trading, China's benchmark Shanghai Composite Index had fallen 244.94 points by close - a loss of 7.6 percent. Throughout the day, it was down by as much as 8.16 percent. The Shenzhen Composite Index had slumped 7.09 percent by close.

China's benchmark indexes, which measure stocks on the country's leading exchanges, have now seen about 20 percent of their value vanish since the beginning of August.

That has catalyzed a massive retreat from Chinese shares, where investors had hoped for more government intervention to keep the markets afloat. But on Tuesday, such an invasive response from Beijing seemed unlikely.

A roller-coaster ride

Analysts have said they don't expect the turbulence on the Chinese markets to cause a global recession, but the sentiment is still notably bearish and strategists at major banks, such as Goldman Sachs, have cut their position on equities due to the Chinese sell-off.

Tokyo's Nikkei stock market also fell by nearly 4 percent on Tuesday. It lost 733.98 points to end at 17,806.7 points - falling below 18,000 points for the first time in around six months.

Worries over the health of its neighbor's economy weren't the only factor weighing on Japanese stocks. The yen has risen in value against the dollar, making Japanese exports more expensive - and thus harder to sell - abroad.

But the news in Asia wasn't all bad. The broadest index of Asia-Pacific shares outside Japan rose 1.1 percent, regaining about a quarter of Monday's losses. Australia's stock market also rallied on Tuesday, making back more than half of the value it lost the day before and rising 2.6 percent.

cjc/uhe (Reuters, AFP, dpa)