NEW YORK (Reuters) – U.S. stocks pared gains on Tuesday amid a renewed drop in oil prices, giving up most of an early rally that had been spurred by speculation of more stimulus efforts in China.

Stock markets from Asia to Europe, and initially on Wall Street, rallied to snap a rout this year in equities after Chinese gross domestic product data showed the slowest growth last year in a quarter century.

Shares in Europe rose more than 1 percent, while MSCI’s broadest index of Asia-Pacific shares outside Japan gained 1.6 percent. But gains on Wall Street were modest, and the Nasdaq closed slightly lower.

The market’s euphoria struck Simon Smith, chief economist at online brokerage FxPro, as odd given that weak GDP data are strange reasons to cheer China. Stimulus can only mean more interest rate cuts or reduced reserve requirements, which would weaken the Chinese currency further, he said.

“Most of the time developed markets have been happy to ignore and be totally uncorrelated to the China markets,” Smith said.

The major U.S. equity indexes faltered as crude prices traded below $29 a barrel. The International Energy Agency, which advises developed countries on energy policy, said the market should remain oversupplied this year and weaker prices could lie ahead.

The potential for oil to tumble further has scared investors as they’re reminded of the financial crisis in 2008 when many financial stocks cratered and their prices never recovered to former levels, Rick Meckler, president of hedge fund LibertyView Capital Management LLC in Jersey City, New Jersey.

“You’re just having this testing of what the bottom on energy is and no one knows the impact of a complete collapse the energy industry would have on U.S. equity prices,” he said, adding that people are afraid oil prices might collapse.

MSCI’s all-country world stock index rose 0.56 percent, paring gains of more than 1 percent. In Europe, the pan-regional FTSEurofirst 300 index closed 1.37-percent higher at 1,310.95.

On Wall Street, the Dow Jones industrial average closed up 27.94 points, or 0.17 percent, to 16,016.02. The S&P 500 rose 1 point, or 0.05 percent, to 1,881.33 and the Nasdaq Composite lost 11.47 points, or 0.26 percent, to 4,476.95.

Brent crude futures closed a touch higher, while the U.S. futures contract slid; their prices settled 30 cents apart. The U.S. contract did not settle on Monday, a U.S. holiday.

Brent crude futures rose 0.74 percent to settle at $28.76 a barrel. U.S. crude futures fell 3.26 percent to settle at $28.46. Earlier they had touched an intra-day high of $30.21.

Investor risk appetite initially improved on the expectation of further stimulus in China and rising prices for Brent, the global benchmark. Chinese oil demand likely hit a record in 2015, helping bolster the global oil benchmark.

The dollar index, which measures the greenback against six major trading currencies, pared most gains to trade 0.11 percent higher. The dollar added 0.22 percent against the Japanese currency, moving to 117.57 yen.

Against the euro, the dollar slipped 0.18 percent to $1.0909.

The benchmark U.S. Treasury note fell 5/32 to lift its yield to 2.0521 percent.

Top-rated German bond yields rose as investors favored riskier assets. The price of 10-year German bonds, viewed as a safe-haven in times of market turmoil, fell and its yield rose 1.5 basis points to 0.485 percent, off the day’s high just above 0.50 percent.

U.S. gold for February delivery fell $1.60 to settle at $1,089.10 an ounce.

(Reporting by Herbert Lash; Editing by James Dalgleish and Nick Zieminski)