SINGAPORE Asian stocks edged up on Wednesday but global equities lacked the impetus for a decisive rebound, with European shares set to fall as investors continue to fret over the United States' looming "fiscal cliff" and the euro zone's intractable crisis.
The euro steadied, having spent much of November in retreat, while worries about the U.S. economy, together with the prospect of weaker demand from a slowing China, weighed on industrial commodities such as oil and copper.
Since the re-election of U.S. President Barack Obama, markets have been focusing attention on how a divided Washington will tackle the series of mandated tax hikes and spending cuts that start to take effect next year and could pitch the world's largest economy back into recession.
"The United States cannot afford not to resolve it, so there might be an 11th hour agreement," said Ben Le Brun, a market analyst at OptionsXpress. "Till then, there will be a lot of uncertainty and that will weigh on markets."
MSCI's broadest index of Asia Pacific shares outside Japan rose 0.4 percent after falling to a seven-week low in the previous session, and Tokyo's Nikkei closed a few points higher after seven straight days in the red.
Major European markets were seen losing ground after closing flat or slightly higher on Tuesday. Financial spreadbetters called London's FTSE 100, Frankfurt's DAX and Paris's CAC-40 to open down 0.3-0.4 percent.
U.S. stock index futures gained 0.4 percent after a decline in Wall Street shares in Tuesday's session, led by a slide of more than 3 percent for Microsoft (MSFT.O) following the surprise departure of a key executive.
After the U.S. closing bell, Cisco Systems (CSCO.O) shares rose 6.8 percent to $18 after it reported quarterly revenue and earnings that beat analysts' estimates.
GREEK BAILOUT DEAL
Weak German business confidence data on Tuesday offered more evidence that the pain from the euro zone debt crisis is spreading even to the bloc's strongest economies, knocking the euro down to its lowest level in more than two months.
The euro rose 0.1 percent to around $1.2717 on Wednesday and climbed around 0.3 percent against the yen.
The single currency has fallen nearly 2 percent against the dollar and more than 1.5 percent against the yen in November as concerns about Greece and Spain have pushed investors towards the safe-haven U.S. and Japanese currencies.
Greece's international lenders on Monday gave the country more time to fix its budget, though they did not disburse the aid Greece had hoped to use to refinance 5 billion euros of its debt by Friday.
The International Monetary Fund and euro zone policymakers remain at odds over a long-term target to bring Greece's debt down and the IMF's push for the euro zone to take further losses on Greek debt.
"For the moment, the market's focus is on whether they can decide on a deal for Greece next week," said Teppei Ino, currency analyst at the Bank of Tokyo-Mitsubishi UFJ.
Both sides in the U.S. "fiscal cliff" debate stood their ground on Tuesday as they gathered in Washington for the first time since the election, with a fundamental tax dispute preventing a broader compromise on deficit reduction.
Uncertainty since the election about the outcome of the negotiations has stoked demand for the safety of U.S. Treasuries, with the benchmark 10-year yield trading around 1.60 percent on Wednesday, close to a two-month low.
"I expect they will reach a stop-gap measure at the very last minute, as they did at the time of negotiation on the debt ceiling," said a fund manager at a U.S. asset management firm.
"At the moment, the market is becoming risk-off but I think the concerns will fade and the Treasury yield could test a high of 1.80 percent."
Commodity markets were subdued, with Brent crude flat near $108.25 a barrel and U.S. crude up a few cents around $85.45.
"Concerns over the Greek debt situation and U.S. fiscal cliff continue to weigh on global demand prospects," analysts at ANZ said in a report. "Coupled with the IEA suggesting Iran's production and exports had rebounded in October and the market is well supplied, the outlook appears to be bearish."
Copper was also flat just below $7,680 a tonne, but gold inched up, gaining 0.2 percent to trade around $1,728.50 an ounce.
(Additional reporting by Hideyuki Sano and Ayai Tomisawa in Tokyo and Manash Goswami in Singapore; Editing by Jacqueline Wong)