By Jeremy Gaunt, European Investment Correspondent
LONDON (Reuters) - World stocks cut some of their losses on Tuesday as Wall Street looked set to open higher, while the dollar gave up early gains and pushed gold to near a record high.
Investors were generally taking profits from Monday's stock rally, which saw U.S. blue chips gain 1.3 percent and European shares 2 percent.
Germany's Ifo business sentiment survey came in more positive than expected, but there was some concern about the banking sector.
A German newspaper reported that the majority owners of WestLB WDLG.UL were threatening not to support the stricken German landesbank's requirement for more capital.
Rating agency Standard & Poor's also said on Monday it found most banks in a global study were weakly capitalised, with Citigroup (C.N), UBS (UBSN.VX) and Mizuho Financial Group (8411.T) more than two-thirds below the average.
MSCI's all-country word stock index .MIWD00000PUS was down 0.2 percent, well off its daily lows, after gaining 1.7 percent on Monday.
But the FTSEurofirst 300 .FTEU3 index of top European shares reversed losses to stand 0.1 percent higher.
"I don't see any negatives out there. The economic data is good," said Bernard McAlinden, investment strategist at NCB Stockbrokers in Dublin.
Some concerns about the U.S. economy were temporarily eased on Monday when data showed sales of previously owned U.S. homes had risen to their highest level in more than 2-1/2 years.
Many global stock investors are nonetheless being cautious heading into the year-end, wanting to lock in profits after a very good run in 2009 while also worrying about the true state of the world economy.
Earlier on Tuesday, Japan's Nikkei .225 hit its lowest close in four months, down 1 percent on the day.
Japan's current concerns are focused on worries financial firms will tap the market for equity financing and on a stronger yen hurting the shares of exporters.
DOLLAR FIRMS
The dollar was flat against a basket of competitors .DXY after earlier putting in some gains. It remains down 7 percent for the year, reflecting low U.S. yields on offer.
The euro reversed course to stand slightly stronger on the day at $1.4978 and the dollar slipped 0.4 percent to 88.60 yen. Continued...
