Europe's major stock markets gave up early strong gains, as banking stocks came under severe pressure.
US stocks rose in early Thursday trading after investor sentiment was lifted by better than expected results from investment bank Morgan Stanley.
By 0930 GMT London's FTSE 100 was down 29 points, in Frankfurt the Dax was up just 15 points and in Paris the Cac 40 was 20 points lower.
Despite Morgan reporting a 42% drop in first quarter profits, analysts had expected much worse from the bank.
UK based HBOS slumped as much as 17% before recovering. HSBC was down 3%.
In the first hour of trading, Wall Street's main Dow Jones index was up 41 points or 0.3% to 12,431.
The exchanges started the session with healthy gains following Tuesday's decision by the US Federal Reserve to cut interest rates by 0.75%.
The main UK, German and French share indexes were also slightly up in afternoon trading in Europe.
In Asia, markets recovered strongly after the Fed's move.
Analysts said US investor confidence was further lifted by US Treasury Secretary Henry Paulson's announcement that changes to government-backed mortgage providers Fannie Mae and Freddie Mac will release an additional $200m (£100m) for the financing of home loans.
In Japan the Nikkei jumped 2.5%, while shares in Australia rose 4%.
Yet despite the rises, analysts said market turbulence could continue for some time.
India and South Korea rose by 2%.
Wall Street
On Wall Street on Tuesday, the Dow Jones stock index recovered from recent losses and registered its biggest one-day gain for more than five years.
The Fed's action was aimed at averting panic after the cut-price takeover of troubled investment bank Bear Stearns.
It was forced into a fire sale to rival JP Morgan Chase for a fraction of its value, in order to avoid collapse.
HAVE YOUR SAYThe people who got into trouble are those that bought houses beyond their meansMarcus, ColombiaSend us your commentsBear Stearns has been one of the highest-profile victims of the subprime mortgage crisis, and subsequent global credit crunch.
US Treasury Secretary Henry Paulson admitted on Tuesday that the US economy was currently facing a "sharp decline", but hoped for a recovery later in the year.
The Fed has now lowered rates six times since mid-September, with the economy reeling from a credit crisis triggered by a slump in the US housing market.
Losses recouped
Japan's benchmark Nikkei index fell to a 31-month low on Monday.
The Federal Reserve has stepped in to try and stave off recession
But by the end of morning trading on Wednesday, a substantial amount of those losses had been recouped, says the BBC's Chris Hogg in Tokyo.
Japanese banks, whose share prices were damaged by the credit crunch, performed well in early trading.
The nerves of Japanese bank sector investors were soothed by better than expected results from two big US institutions on Tuesday.
Goldman Sachs and Lehman Brothers, reported smaller falls in profits than analysts had been expecting.
But analysts are warning of more volatility ahead, our correspondent says.
