Global stock markets wobbled in cautious trade on Wednesday, reflecting investor anxiety over the fate of a US finance sector rescue package pending in Congress and a widening banking crisis in Europe.

European and Asian shares were mainly higher in anticipation of passage of a rescue plan worth some $700-billion, but Wall Street was hesitant after two large moves earlier this week.

The Dow Jones Industrial Average pared heavy opening losses and ended down 19.59 points (0.18 percent) at 10 831.07.

The Nasdaq composite shed 1.08 percent and the broad-market Standard & Poor's 500 index dipped 0.45 percent.

The market action followed a record 777-point drop for blue chips on Monday followed by a powerful rebound Tuesday that recovered more than half the losses, or 485 points.

Investors were awaiting a Senate vote on a bill worth up to $700-billion to aid the financial sector reeling from a housing meltdown.

The legislation has been modified after a stunning rejection on Monday in the House of Representatives.

"It would appear that we are teetering between relief and despair at the moment and Congress will determine which way we tilt," said John Wilson, equity strategist at Morgan Keegan.

"I think the odds are high that they will get something done and the financial markets will then breathe at least a temporary sigh of relief."

Analysts said trade was cautious ahead of the Senate vote, and that passage of the bill did not guarantee a quick end to the financial crisis.

"If a rescue plan passes, the removal of indecision alone should be enough to give stocks a reasonably good boost," said Gregory Drahuschak at Janney Montgomery Scott.

"We, however, would caution investors that it is not likely to be the catalyst for uninterrupted upside that last for an extended period. A rescue plan will calm the credit markets and probably will motivate some additional lending, but it is not likely to alter the potential for slow (economic) growth in the current quarter through the middle of 2009."

Bob Dickey at RBC Dain Rauscher said he believed the worst is likely over for the market and that this period will be seen as a major buying opportunity.

"Given all the news we have seen in past weeks, and will likely be around for weeks to come, we can expect to see continued volatility in both directions," he said.

"But, we believe that we have seen an important bottom here, at least on an intermediate-term basis."

European authorities meanwhile confronted their own banking woes, calling for joint European Union action after troubled banks in several countries had to be rescued with government funds.

The Italian government pledged to guarantee stability in the banking system, helping leading bank UniCredit to recover from a battering on the stock market.

The ministry vowed to "protect the Italian market from attacks of a speculative nature fueled by the climate of uncertainty weighing on the international financial system".

After suffering sharp sell-offs on Monday and Tuesday, UniCredit bounced back on Wednesday with a gain of 11.24 percent.

Despite European banking sector stress, the London FTSE 100 index of leading shares gained 1.17 percent to close at 4959.59.

In Paris, the Cac 40 index rose 0.56 percent to 4,054.54 while in Frankfurt the Dax fell 0.42 percent to 5806.33.

Elsewhere, Brazil's Bovespa edged up 0.52 percent while the Canadian S&P/TSX fell 0.33 percent. The Mexican Bolsa climbed 0.92 percent.

Earlier in Asia Tokyo added 0.96 percent and Sydney jumped 4.2 percent. Many Asian markets were shut for public holidays including Hong Kong.

AFP