Concerns that Europe's debt crisis may be worsening, particularly in Greece, kept stock markets in check Wednesday while soft Japanese economic figures added to the evidence suggesting that the global economic recovery is running out of steam.
Stocks are failing to recover much from Monday's steep losses as investors' appetite for risk remains low given a broad range of concerns. When investors are reluctant to take on risk, stocks invariably suffer.
The current bout of jitters, which have lasted for around a month, have been based on two main factors _ that the global economy is faltering and that Europe's debt crisis is deepening.
Greece continues to be the main driver of European debt concerns, even more so after meetings Tuesday indicated a lack of consensus between the government and the opposition. The EU has repeatedly stressed that it's vital that politicians in Greece agree on the broad outlines of an austerity strategy beyond the end of the government's current term in 2013.
"Certainly the prospect of political uncertainty unsettling the financial markets is a real threat given that the leader of the opposition party, Antonis Samaras, has stated that he will oppose any new fiscal austerity measures," said Lee Hardman, an analyst at The Bank of Tokyo-Mitsubishi UFJ.
Some analysts say Greece's Socialist Prime Minister George Papandreou could decide to call early elections in an attempt to get a renewed mandate for a strategy to deal with the mountain of debt.
Earlier this week, the Greek government announced a raft of new fiscal measures, which included more than euro6 billion in savings for this year, tax increases and pledges to immediately start previously announced privatizations. It aims to narrow the country's budget deficit from 10.5 percent of gross domestic product last year to 7.5 percent by the end of 2011.
Progress on selling assets and getting the country's borrowing levels down is crucial for Greece if it is to continue getting bailout funds.
While many investors think that Greece will eventually have to restructure its debts in some form, they are also trying to gauge whether other countries, such as Italy or Belgium, but particularly Spain, will be dragged into the debt mire.
"If Spain is drawn headlong into the peripheral crisis, the nature of the game will change in so far as this would signal that contagion is far closer to increasing its spread further away from the periphery and towards the core," said Jane Foley, an analyst at Rabobank International.
Amid these concerns, European stocks were struggling to recover from Monday's losses, when debt concerns were particularly acute. Germany's DAX was a couple of points lower at 7,149 while the CAC-40 in France fell a similar amount to 3,914. The FTSE 00 index of leading British shares was up 0.1 percent at 5,865.
The euro was similarly subdued, trading 0.1 percent lower at $1.4074.
Wall Street was poised for a fairly subdued opening too _ Dow futures were down 0.1 percent at 12,318 while the broader Standard & Poor's 500 futures fell a similar rate to 1,313.
Earlier in Asia, Japan's Nikkei 225 lost 0.6 percent to 9,422.88 after government figures showed the country's exports slid 12.5 percent in April _ a further indication of the devastating impact of the March 11 earthquake and tsunami. The index has lost 8.1 percent since the quake.
Bank of America Merrill Lynch said the Japanese economy would be constrained by parts and power shortages for two more quarters but begin to recover strongly from the final quarter of 2011.
Elsewhere, South Korea's Kospi sank 1.3 percent to 2,035.87 and Australia's S&P/ASX 200 lost 1 percent to 4,584.70. Hong Kong's Hang Seng was up 0.1 percent to 22,747.28 but mainland Chinese shares fell on expectations of new monetary tightening policies to counter inflation that might also slow economic growth.
The benchmark Shanghai Composite Index lost 0.9 percent to 2,741.74, the fifth straight losing session, and the Shenzhen Composite Index lost 1.5 percent to 1,134.19.
The largely soft tone in stock markets pushed oil prices lower _ the two assets have moved in broadly similar directions for the last few months. Benchmark crude for July delivery was down 15 cents a barrel to $99.47 in electronic trading on the New York Mercantile Exchange on Wednesday.
Pamela Sampson in Bangkok contributed to this report.