Nervous investors sold stocks and generally deserted the dollar on Tuesday, still gripped by lingering worries over the global financial impact of the slumping U.S. housing market.

European, Japanese and previously high-flying emerging market stocks all fell although the price of oil, which has been causing concern as a threat to economic growth, eased.

Gold bounced back to around $801 an ounce after earlier slipping as low as $790.80.

Investors have been pulling money out of riskier assets this month as the U.S. economy slows and the fall out from the credit crisis continues.

UBS said risk aversion among equity investors had turned extreme, according to its in-house gauge, hitting levels not seen for two months.

The investment bank's latest risk report also showed growing risk avoidance among fixed income investors and on foreign exchange markets.

Renewed fears largely emanated from more financial write-downs than expected as well as increased concerns about the spill over into the real economy and the willingness of the (Federal Reserve) to cut rates in response to slowing growth, it said on a note.

Stock markets in Europe and Asia followed New York lower.

The FTSEurofirst 300 index of top European shares was down 0.9 percent. Japan's Nikkei closed 0.46 lower. MSCI's main emerging market stock index was off 0.2 percent after losing around 3.5 percent on Monday.

There's increasing concern about global inflationary pressures, and the ability of banks to cut rates, said Justin Urquhart Stewart of 7 Investment Management.

DOLLAR WEAKENS

The dollar was weaker against most currencies, falling 0.2 percent against a collective basket. The euro was up half a percent at $1.46 while Britain's pound gained 0.6 percent to nearly $2.07.

Japan's yen, however, was an exception, slipping from this week's 18-month peaks against the dollar.

The low-yielding yen had surged as renewed fears that credit-related problems could spread to the broader U.S. economy sapped risk appetite among investors, prompting them to buy back the yen they sold to invest in higher-return currencies.

Catalysts for Tuesday's pull-back included above-forecast Japanese growth data and a Financial Times report quoting Prime Minister Yasuo Fukuda as saying the yen was appreciating too fast and speculators needed to be careful to avoid the possibility of intervention.

The Bank of Japan also left interest rates unchanged.

The dollar was up 0.5 percent at 109.9 yen.

Oil fell below $94 a barrel. U.S. light crude for December delivery was down around $1.30 a barrel at $93.35 after the International Energy Agency cut its world oil demand growth forecast.

Demand for euro zone government bonds was slight, with yields slightly higher. The 10-year bond was yielding 4.114 percent.

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