Asian stocks trimmed earlier gains Wednesday as investors remained skeptical about whether European leaders are going far enough their efforts to stop the region's sovereign debt woes from sparking a full-blown banking crisis.
Doubts also grew over the sustainability of a rise in U.S. stocks Tuesday after Federal Reserve Chairman Ben Bernanke promised more economic stimulus if needed, easing concerns over the damage to the U.S. economy from a possible Greek default.
The market in Asia is testing Bernanke's resolve to be able to provide stimulus, said Jonathan Barratt, managing director of Commodity Broking Services.
What the market wants to see is something definite, and it is losing faith in what Bernanke can deliver.
In credit markets, which have been showing increasing signs of strain in recent week, the iTraxx Asia ex-Japan investment grade index was steady, after a sharp widening earlier this week.
In the latest blow to be dealt to investor confidence by Europe's intractable crisis, Moody's lowered its rating on Italy's bonds by three notches Tuesday, saying it saw a material increase in funding risks for euro zone countries.
They have to be continuously seen to be working on the problem, said Barratt, adding that European policymakers needed to show concrete action to convince the markets.
MSCI's broadest index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> rose 0.3 percent, after rising as much as 0.9 percent earlier. It hit a two-year low the day before.
But Japanese and Korean shares were down, turning negative after an initial gain. The Nikkei <.N225> fell 0.8 percent, after opening up 0.4 percent, as investors cautiously gauged the progress in Europe. <.T>
There are now hopes that a worst-case scenario in Europe will be avoided, but because this plan is still under consideration and is not formally decided yet, plenty of risks remain, said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities.
As the euro slipped from highs, gold's rise was capped, while other commodities such as oil and copper struggled to extend gains on lingering concerns over global demand.
Brent crude was up 1.71 percent, but off an intraday high of $102.10 a barrel, as tighter U.S. crude stocks and promises by the Fed to launch new stimulus measures if necessary helped halt a sharp three-day sell-off.
U.S. crude traded up $2 at $77.67 a barrel.
The euro eased 0.4 percent against the dollar, faltering after a brief rally that had lifted the single currency from a near nine-month trough against the dollar and a decade low versus the yen Tuesday.
European finance ministers agreed Tuesday to safeguard their banks as doubts grew about whether a planned second bailout package for debt-laden Greece would go ahead.
A sense of urgency appeared to be heightening in Europe as French-Belgian municipal lender Dexia SA
Tensions remained, however, as euro zone finance ministers postponed a crucial aid payment to Greece until mid-November, while European Union ministers said they were reviewing the size of private-sector involvement in a second bailout package for Athens.
Japan Wednesday offered its share of help, saying it would consider continuing its purchases of bonds issued by Europe's bailout fund.
(Additional reporting by Lisa Twaronite; Editing by Alex Richardson)