Asian shares put in a mixed performance on Wednesday as a sharp rally in stock markets this week over a U.S. plan to deal with toxic debt ran out of steam.
In Europe, stocks were expected to open lower, tracking Wall Street's losses on Tuesday as global investors turn cautious about pushing the rally much further for now.
In Asia, shares in South Korea <.KS11> and Australia <.AXJO> rose and the MSCI index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> nudged up to set a fresh 2- month peak.
But Japan's benchmark index ended down 0.1 percent as bank stocks took a breather. Mitsubishi UFJ Financial Group <8306.T>, the country's top lender, fell for the first time in eight sessions.
The yen edged up, winning respite from a fall to multi-month lows this week while the dollar dipped against the euro after a steep rise the previous day on growing expectations of lower euro zone interest rates and U.S. President Barack Obama's comment its strength was a sign of confidence in the economy.
Obama told a prime time news conference he was seeing signs of progress in his drive to lead the United States out of economic crisis and there was no need for a global currency - a suggestion made by China and Russia.
Second thoughts about the U.S. Treasury's plan to persuade private firms to help rid banks of up to $1 trillion in toxic assets sent Wall Street lower on Tuesday, reversing some of the hefty gains made on Monday when the plan was released.
Investors remain wary that large advances in stock markets in recent weeks could quickly fizzle out amid a stream of gloomy economic news and weaker corporate earnings as the global recession saps consumer spending and investment.
The enthusiasm surrounding the U.S. administration's bank plans has been pared back slightly amidst some doubts about its effectiveness, Calyon's global head of FX strategy, Mitul Kotecha, wrote in a client note.
Nonetheless, the pull back in equity markets was relatively small in comparison to the gains registered over recent weeks and for the most part the reaction to the plans remains positive.
The MSCI index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> rose 0.4 percent and has gained about 28 percent from a five-year low last November.
On Tuesday the Dow Jones industrial average <.DJI> ended down 1.49 percent while the S&P 500 Index <.SPX> shed 2 percent. S&P futures were steady in Asian trade on Wednesday.
JAPAN TRADE SURPLUS
Japan's benchmark Nikkei <.N225> reversed early losses but failed to sustain a move into positive territory, after jumping 3.3 percent the previous day to post its highest close since January 9. Exporters such as electronics giant Sony Corp <6758.T> tumbled on expectations of weaker earnings <.T>
It has been too good to be true, with the Nikkei jumping nearly 1,500 points in such a short period, so the market is due for a breather, said Fumiyuki Nakanishi, manager at SMBC Friend Securities. There are few investors willing to chase prices higher from the current levels.
Japan reported a record fall in exports in February, with no sign that demand is recovering in its key U.S. and European markets, as well as a sharp decline in imports.
The data pointed to more pain for an economy already mired in its worst recession since the 1974 oil shocks, showing both domestic consumption and overseas demand were crumbling under the weight of the global slowdown.
The yen's reaction to the data was subdued. The euro fell 0.3 percent against the Japanese currency to 131.52 yen, after hitting a five-month high of 134.50 yen in the previous session.
The Australian dollar fell 0.3 percent to 68.03 yen, down from Tuesday's 4- month high of 69.60 yen.
The euro was steady at $1.3482, having come down from last week's 2- month high of $1.3739, but had been slightly firmer in earlier dealings.
U.S. crude futures pulled back toward $53 a barrel on signs of cooling demand in the world's top consumers.
U.S. light crude for May delivery fell 71 cents to $53.27, after hitting its highest in nearly three months this week above $54.00 a barrel.
U.S. 30-year Treasury bond prices edged down after sharp gains the previous day on plans by the Federal Reserve to include the long bond in its buying of U.S. government debt.
The benchmark 10-year bond held steady as the market awaited the first of the Fed's government debt purchases and a record sale of five-year notes from the U.S. Treasury.