Rising global stock markets following the capture of deposed Iraqi leader Saddam Hussein quickly ran out of steam on Monday.
Investors remained cautious about the prospects for greater stability in Iraq, analysts said.
US stocks markets ended Monday lower, while in London the FTSE 100 sank back almost to its opening level.
Major European markets gave up roughly two thirds of their gains, and the dollar hit new lows against the euro.
Almost daily attacks against coalition forces have weighed on investor confidence in recent months. Nine people died when two further bombs went off at Baghdad police stations on Monday.
The dollar initially strengthened against the euro. But it slid again as currency traders' attention returned to the heavy US trade and government deficits.
Traders said these would continue to weigh on the dollar, which sank to $1.232 against the euro, slightly below its previous worst performance on Friday.
The euro was worth $1.231 by late afternoon in New York. The dollar also slipped compared to the Swiss franc but strengthened slightly against sterling.
Crude oil also ended Monday costing more as traders remained sceptical about prospects for an improvement in the Iraqi security environment.
The price of a barrel of the benchmark Brent crude had dropped 2% to $29.76 in early trade, but it was trading at $30.42 at the close of London trade.
The effect of the post-capture euphoria were felt immediately, with solid gains on European stock markets as soon as they opened.
But investors took profits as the day progressed. Most European bourses ended the day with only modest rises.
In London, the FTSE 100's midday gains of 0.6% slipped away, while midday rises of nearly 1.5% on the Paris and Frankfurt leading indexes were pared back.
WORLD MARKETS AT 1700 GMT
New York Nasdaq: -1.53%
London FTSE 100: +0.01%
Paris Cac 40: +0.5%
Frankfurt Dax: +0.4%
Tokyo Nikkei 225: +3.16% (close)
It was a similar story in the US, where stocks got off to a roaring start. The Nasdaq put on 1.5% as the market opened, while the Dow Jones added 0.6%.
However, the Dow Jones failed to deliver the 100 point opening surge that some analysts had predicted and closed down more than 19 points, or 0.2%, at 10,022.82.
Analysts said some investors had worried that too big a post-capture surge might dampen gains in the the New Year.
'Nothing has changed'
European stock markets, said analysts at Nomura Securities, were looking at a bright future - at least in the short term.
"Saddam has been captured... economic news is generally beating expectations, the Dow Jones index has crossed its 10,000 Rubicon," they wrote in a note to clients.
The capture of Saddam Hussein could even encourage the White House to pare back its protectionist tendencies, they said.
But fundamental economic questions such as the ballooning US trade and government deficits remain, others warned - while the risk to security in Iraq remained acute.
"Markets were always going to go up on this news, but it's not going to be 5% or anything like that," said Daniel Birch, strategist at independent brokers Execution Ltd.
In Asia, Japan's Nikkei posted its biggest jump since July, while Australia's benchmark index also advanced.
Oil markets are waiting to see if attacks subside
The value of safer, less risky assets such as gold and bonds decreased amid optimism that the arrest of Saddam Hussein might mean a quicker US withdrawal from Iraq and less spending on the military.
Gold for delivery in February fell 20 cents to $409.90 an ounce on the New York Mercantile Exchange on Monday, though at one point it had traded as low as $405.20.