LONDON World markets were little changed on Wednesday as investors waited to see if there would be progress in approving an aid payment for Greece and in addressing the U.S. fiscal cliff.
A wave of strikes across Europe to protest against spending cuts and tax hikes kept the focus on the region's debt crisis.
"A quick solution for the U.S. fiscal cliff doesn't seem to be on the cards and (there are) ongoing worries about Greece and renewed concern about Spain," said Zeg Choudry, head of equities trading at Northland Capital.
The MSCI world equity index was ultimately little changed around 321.90 points after five days of losses, as falls across Europe were offset by a 0.4 percent rise in Asia as markets there recovered from seven-week lows.
U.S. stock index futures pointed to an early rebound on Wall Street where the release of minutes from the last Federal Open Market Committee meeting later is likely to confirm an easy policy bias for some time to come.
But in Europe investors were unable to shake off concerns about a rekindling of the debt crisis, sending the FTSEurofirst 300 index of top European shares down nearly 0.5 percent by the midsession to 1,093.87 points, erasing all of Tuesday's 0.4 percent rise.
"The failure to sustain any momentum to the upside suggests there is a buyers' strike and they are staying on the sidelines, waiting for a resolution either in Greece or in the U.S.," Ioan Smith, strategist at Knight Capital said.
London's FTSE 100, Frankfurt's DAX and Paris's CAC-40 were between 0.4 and 0.6 percent lower.
Although Greece is now expected to secure short-term funding to meet its debt obligations, international lenders disagree over how Athens can cuts its borrowings to more sustainable levels, and a deal to release aid payments remains some way off.
The concerns over Greece, as well as lingering uncertainty over whether Spain will seek a bailout and the prospect of slow economic growth across the 17-member euro area also boosted demand at a German debt auction.
Triple-A rated Germany sold 4.3 billion eurosof two-year bonds that paid no interest, meaning Berlin was able to borrow for free because investors prize the country's strong fiscal position and highly liquid debt market.
"It's a combination of worries about the euro land economy plus ongoing fiscal concerns in Greece keeping the short end of the German curve underpinned," said Nick Stamenkovic, strategist at RIA Capital Markets in London.
Italy's borrowing costs also fell at a 3.5 billion euro sale of new three-year government bonds, which completed its funding needs for the year.
While Italy's bonds are considered risky because of its high debt levels and weak economic outlook, borrowing costs have been coming down due to the European Central Bank's promise of support for nation's struggling to fund themselves.
"Demand was solid, and the yield on the three-year note resumed its downward trend and is at pre-crisis levels," Nicholas Spiro, managing director at Spiro Sovereign Strategy.
The euro meanwhile gained against both the dollar and the yen after Japan's Prime Minister Yoshihiko Noda said he was set to dissolve parliament's lower house on Friday for a snap election next month, which is likely to cost him his job,
Opinion polls show Noda's Democratic Party of Japan (DPJ) heading for a drubbing in the vote, which government and senior party members have said would be held on December 16.
That outcome is regarded as negative for the yen as the main opposition Liberal Democratic Party (LDP) favours further monetary policy easing by the Bank of Japan.
The dollar rose 0.9 percent to 80.12 yen and the euro climbed 1.2 percent on the day to 102.10 yen. Against the dollar, the euro was 0.25 percent higher at $1.2730.
The greenback was easier against most major currencies other than the yen on growing signs that the Federal Reserve was likely to adopt an ultra-loose monetary stance in coming months.
Influential Fed Vice Chair Janet Yellen said on Tuesday that U.S. interest rates may need to stay near zero until early 2016 to forcefully lift employment.
However, any weakness was still being capped by concerns that Washington will fail to find compromises needed to avoid a series of mandated tax hikes and spending cuts due to take effect next year that could send the world's largest economy back into recession.
U.S. Treasury yields edged higher in Europe on Wednesday but were not expected to stray far from their lowest levels since September on concerns over the outcome of negotiations.
"The negotiations will be tough and could trigger a downgrade of the U.S. credit rating," said Efigest Asset Management portfolio manager Regis Yancovici.
Ten-year Treasury yields were up two basis points in European trade at 1.61 percent, having fallen as low as 1.57 percent on Tuesday.
Moves in commodity markets were limited, with traders watching developments in Europe and the United States and also wary about the ramifications of the political transition in China due to be announced on Thursday.
On Wednesday, the 2,270 carefully vetted party delegates cast their votes in Beijing's Great Hall of the People for the new central committee, which in turn will appoint the Politburo Standing Committee that will ultimately rule China.
The new government's attitude to supporting growth, which has been slowing all year, will be closely watched as China is the world's top consumer of many commodities.
Three-month copper on the London Metal Exchange was down 0.4 percent at $7,646 a tonne, while gold fell 0.1 percent to $1,722.91 an ounce, still below a 3-week peak of around $1,738 struck on Friday.
In oil markets Brent crude reversed early losses to gain 54 cents to $108.80 a barrel, supported by the dollar's fall against a basket of currencies, aside from the yen, which makes dollar-denominated oil more affordable.
U.S. oil gained 34 cents to $85.72, snapping two days of losses.
(Reporting by Richard Hubbard; Editing by Will Waterman and Anna Willard)