Having opened strongly in the wake of a better than expected earnings update from IBM Corp. and hopes that the U.S. government may take stakes in struggling banks, the Dow slid back into the red when GM revealed that its operations in Europe were performing badly.

GM shares dropped around 18 percent after it said its car sales in Europe fell 1.9 percent to 1.6 million vehicles in the first nine months of the year.

That weighed on the Dow, which at mid-afternoon London time, was 78.45 points, or 0.85 percent, lower at 9,179.65.

Europe’s stock markets, which had traded as much as 3 percent higher, slipped back along with the Dow. Germany’s DAX was 61.43 points, or 1.2 percent, lower at 4,952.19, while France’s CAC-40 was up 9.39 points, or 0.3 percent, down at 3,487.50. The FTSE 100 index of leading British shares was 10.40, or 0.2 percent, lower at 4,356.29.

Despite the renewed selling, market participants stressed it was not panic selling

“A lot of people believe the bottom has been reached but that doesn’t mean volatility hasn’t gone away,” said Howard Wheeldon, senior strategist at BGC Partners.

“The underlying fear is how much hell we have in terms of recession,” he added.

At Wall Street’s open, investors in the U.S. had been encouraged by the prospect that the Bush administration may take ownership stakes in certain U.S. banks as a way for dealing with a severe global credit crisis.

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