US equity markets opened sharply lower this morning following a 4.3% fall in China’s Shanghai index, but halfway through the session stocks have rallyed off the lows back into the green.

The S&P, which traded as low at 980 at the opening, is now 0.93% higher at 998, while the Dow is trading 0.98% up at 9,308, and the Nasdaq is 0.72% higher at 1,970.

Elsewhere in the world, stocks were worse off. In Europe, England’s FTSE 100 shed 0.7% and the German Dax closed 0.9% lower. In Asia, Japan's Nikkei dropped 0.8% and Hong Kong’s Hang Seng slid by 1.7%.

Risk aversion and nervousness are the themes in global financial markets this morning,” said economist Jennifer Lee from BMO before the bell. 

In contrast to equities, crude oil rallied to more than $72 ―  a two-week high ― when the government reported that oil supplies were lower than expected. 

News has been sparse this morning. Before the bell, the Weekly Mortgage Applications Survey showed average rates for a 30-year mortgage fell 23 basis points to a 6-week low at 5.15% last week, which helped to boost purchases (+3.9%), refinancing (+6.9%), and new loans for mortgages (+5.6%).

Less optimistic news was seen at 10:00 when the National Association of Realtors reported that commercial real estate activity was unlikely to see expansion until mid-2010.

The Commercial Leading Indicator for Brokerage Activity softened by 1.3% between April and June to a score of 101.5. That’s the lowest level since the first months of 1994 and nearly 14% below the Q2 2008 level.

“The reduction in commercial real estate activity is expected at least through the first quarter of 2010,” said Lawrence Yun, chief economist at the NAR. “Any meaningful recovery is not likely to occur before the second half of next year.”