| NEW YORK
NEW YORK Global equity markets faltered on Wednesday as a mixed reading of U.S. housing data took the shine off this year's stock rally, while oil prices fell as the prospect of increased Saudi supply offset optimism spurred by an improving worldwide economy.
An index of world shares rose to a 4-1/2-year high before turning lower. Investors were cautious ahead of the release of minutes from the Federal Reserve's most recent meeting later in the day, which are expected to provide insight into the U.S. central bank's thinking on policy.
Global equity markets have surged over the last seven months as major central banks repeatedly delivered monetary support to weak economies. But a more than 7 percent rise in the S&P 500, the U.S. benchmark, so far this year has given investors pause as to how much further the rally can go.
"The market seems very tired and listless, and investors are prone to take profits now as they wait for the music to stop," said Matt McCormick, a money manager at Bahl & Gaynor in Cincinnati.
Traders also said there were unconfirmed rumors in the market that a troubled hedge fund was selling assets.
"I heard the chatter about a hedge fund liquidating things today, but how big I don't know. Certainly it sparks concern," said Michael James, senior trader at Wedbush Morgan in Los Angeles.
MSCI's all-country world equity index rose to 359.37 points, its highest level since June 2008, before retreating to trade down 0.17 percent on the day at 357.45.
Wall Street slipped lower and the FTSEurofirst 300 index of top European shares closed down 0.26 percent to a 1,168.72.
U.S. residential construction fell in January but a jump in permits for future home building to a 4-1/2-year high offered hope the housing market recovery remains on track.
The Dow Jones industrial average was down 19.86 points, or 0.14 percent, at 14,015.81. The Standard & Poor's 500 Index was down 6.22 points, or 0.41 percent, at 1,524.72. The Nasdaq Composite Index was down 18.14 points, or 0.56 percent, at 3,195.46.
The Dow edged higher at one point on gains by Boeing Co (BA.N), which has found a way to fix battery problems on its grounded 787 Dreamliner jets, a source familiar with the U.S. company's plans told Reuters.
Boeing shares rose 1.3 percent to 75.62, though the Dow gave up earlier gains.
European shares fell as surprise dividend cuts by British insurer RSA (RSA.L) and Lufthansa (LHAG.DE) and weak results from the likes of Accor, Europe's biggest hotelier, and miner BHP Billiton weighed on sentiment.
RSA (RSA.L) was the biggest single declining stock after it cut its dividend by a fifth after weak investment returns, sending its shares down 14.9 percent.
Lufthansa (LHAG.DE), Europe's biggest airline, shed 6.2 percent to close at 15.00 by withholding a dividend for the second time in three years.
Oil prices fell with news on expectations of greater supply of crude.
Saudi Arabia, the world's top exporter of crude oil, expects to raise its output in the second quarter to satisfy higher demand from China and drive economic recovery elsewhere, oil industry sources said, but the exact rise in volume was unclear.
April Brent crude futures were down $1.61 at $115.91 a barrel after posting their first gain in four sessions on Tuesday. U.S. crude fell $1.96 to $94.70. The contract expires later on Wednesday.
U.S. Treasury debt prices eased, tracking falls in German bonds after a weak auction, although the market was seen range-bound before the release of minutes of the Federal Reserve's January policy meeting later in the day.
The benchmark 10-year U.S. Treasury note was up 3/32 in price to yield 2.0173 percent.
The dollar edged higher against the yen on the perception the data showed an overall improvement in the U.S. housing market.
The housing report's impact on the dollar-yen rate was a bit of a surprise as it has been driven by Japanese monetary policy despite major U.S. data over the past few months.
The yen gained on Tuesday on a potential rift between Japanese Prime Minister Shinzo Abe and Finance Minister Taro Aso with respect to foreign bond purchases. Aso said he was not considering foreign bond buying, while Abe had indicated buying was an option.
The euro trimmed losses against the dollar to trade 0.28 percent lower at $1.3348.
Against the yen, the dollar fell as low as 93.11 yen after Abe's remarks, before recovering to trade at 93.50 yen, down 0.1 percent on the day, helped largely by the U.S. housing data.
The decline in U.S. housing was due to the more volatile multi-family component, analysts said, while the single-family category rose to its highest since July 2008.
"Housing starts may have missed but they are still relatively high compared to where we are in the cycle," said Brian Kim, currency strategist, at RBS Securities in Stamford, Connecticut.
"Overall, I would say, housing starts and building permits were generally constructive."
(Additional reporting by Marc Jones in London; Editing by Andrew Hay and Leslie Adler)