Equities came off the boil globally on Thursday, after rising every day so far this year, as investors stepped back to await key U.S. economic data at the end of the week.
The dollar firmed, partly due to the yen softening after new Japanese Finance Minister Naoto Kan said he wanted it to weaken more.
Investors have entered 2010 in bullish form, taking stocks to new 15-month highs in the United States, Japan and Europe. But the mood is contingent on firm evidence that global economy is recovering, particularly in the United States.
U.S. jobs data due on Friday is seen as key.
James Bullard, president of the St. Louis Federal Reserve Bank, told an audience of university students in Shanghai that the labor market in the United States was improving and the economy was close to the point when the unemployment rate will start to fall.
Stock investors, however, were playing it safe. MSCI's all-country benchmark <.MIWD00000PUS> was down a quarter of a percent after gaining as much as 2.5 percent this week.
Markets may take a breather today, but that's a buying opportunity, said Franz Wenzel, strategist at AXA Investment Managers in Paris. Growth is recovering.
Europe's FTSEurofirst 300 <.FTEU3> was down half a percent. Japan's Nikkei average <.N225> earlier closed down 0.46 percent.
Investors are also concerned about a number of structural problems, not the least the state of some euro zone countries' finances.
European officials were on the second day of an inspection visit to Athens to discuss Greece's stability program. Greece has seen its debt downgraded but insists it does not need to be bailed out by its EU partners.
The yen fell against the dollar and other currencies after Japan's new finance minister stirred talk the country may be more inclined to stem any sharp rise in the yen.
Speaking after being appointed finance minister, Kan said many Japanese firms were in favor of the dollar/yen around 95 yen, higher than the pair has been trading in the latter part of 2009.
The dollar was up 0.4 percent at 92.75 yen.
His comments may mark a shift of Japanese FX policy toward weakening the JPY, in our view, Barclays Capital said on a note.
Such a stance seems to be appropriate for Japan, considering the weak growth prospects, particularly in the first half of 2010, which will see less economic stimulus measures and, therefore, a strong need for exports to push up the whole economy.
Against a basket of major currencies <.DXY>, the dollar gained a quarter of a percent. The euro was down 0.3 percent at $1.4367.
Euro zone government bond yields were flat to slightly higher.
(Additional reporting by Brian Gorman, editing by Mike Peacock)