Updated December 19, 2018 12:34:52

Photo: Oil prices collapsed on reports that the US and Russia are pumping at record levels amid slowing demand. (ABC News)

Wall Street was on track for a strong rebound, but lost its momentum near the end of a highly volatile session — and are still in correction territory.

The local share market is expected to fall in early trade, following the dour sentiment on US markets.

Meanwhile, the Australian dollar is steady at 71.8 US cents, but has slipped to 56.75 British pence and 63.1 Euro cents.

The biggest fall, however, occurred in oil markets overnight, over reports that the United States and Russia were continuing to pump at record levels.

That was despite analysts' concerns about an oil oversupply, amid forecasts of weakening oil demand and slowing global economic growth.

Brent crude plunged 5.9 per cent to $US56.08 per barrel, its lowest value in 14 months.

Meanwhile, West Texas crude plummeted by more than 7 per cent to a 16-month low of $US46 a barrel.

This led to energy stocks being among the weakest performers across US and European markets overnight.

Worst December since the Great Depression

It all looked promising as the main US indices pushed higher for most of the day — but fell in and out of negative territory in the final trading hour.

Steep drops in global stock markets over the last two months have sapped investor confidence.

The benchmark S&P 500 index ended its day flat at 2,546, around a 14-month low.

The tech-heavy Nasdaq Composite rose 0.5 per cent to 6,784, thanks to a rebound from technology stocks including Facebook (+2.5pc) and Alphabet (+1.7pc), which is Google's parent company.

At its peak, the industrial-skewed Dow Jones index surged 300 points earlier in the session.

However, the Dow's gains have since moderated — rising 82 points, or 0.35 per cent, to 23,675.

Given its steep falls, the Dow and S&P are on track for their worst December since the Great Depression.

"We're facing the biggest December fall in US stocks since 1931 and this is striking and worrying at the same time," said Chris Bailey, an equity strategist at financial services firm Raymond James.

'Feel the market'

Wall Street investors are closely watching the Federal Reserve, which is widely expected to announce an interest rate hike on Wednesday afternoon (New York time).

It would be the fourth time that the Fed raises borrowing costs this year.

Global markets plunged on Monday (New York time), on fears the Fed might be lifting rates too quickly amid concerns of a slowing US economy.

US President Donald Trump has once again tweeted his displeasure at the central bank's monetary policy.

"I hope the people over at the Fed will read today's Wall Street Journal Editorial before they make yet another mistake," he wrote.

"Also, don't let the market become any more illiquid than it already is. Stop with the 50 B's.

"Feel the market, don't just go by meaningless numbers. Good luck!"

Meanwhile, European markets finished in the red, with a slight retreat for Frankfurt (-0.3pc), and steep losses for London (-1.1pc) and Paris (-1pc).

Fears of government shutdown

The possibility of a partial government shutdown added to investors' worries.

Volatility spiked in the final trading hour after US Senate majority leader Mitch McConnell said Democrats had rejected his spending bill proposal.

Without the passage of a spending bill, several government agencies are at risk of a shutdown.

Mr Trump said it was too early to say whether a partial government shutdown will be averted by a midnight Friday deadline, when existing funds for several agencies expire.

"We'll see what happens," he told reporters.

Previously, Mr Trump had demanded that Congress approve $US5 billion in new funds for the wall that he argues is needed to stop illegal immigrants and drugs from entering through the south-west border.

The Trump administration also said it was searching for ways to unilaterally fund the building of a controversial wall on the US-Mexico border at which Congress is balking.

White House press secretary Sarah Sanders told reporters that the President had asked his Cabinet agencies to "look and see if they have money that can be used" to begin building the wall.

Follow David Chau on Twitter @chaudave.

ABC/Reuters

Topics: business-economics-and-finance, markets, stockmarket, currency, australia

First posted December 19, 2018 07:53:34