Asian shares fell and the euro slipped on Thursday as short covering rallies ran out of steam, but some analysts said global markets may have finally found support after a heavy selloff in May.
European shares were expected to eke out small gains, with financial spreadbetters calling London's FTSE 100 <.FTSE> to open up 0.2 percent. <.L>
But concerns about the euro zone's fiscal frailty lingered.
We're much happier over here in Asia, but we don't live in our own world, said Nicholas Yeo, head of China/HK equities at Aberdeen Asset Management. What happens in the West will affect Asia.
Oil, which has been tracking moves in the euro and stock markets, fell back from a six-week high, while gold, which tends to gain from falling share markets due to its safe haven appeal, firmed to near its highest in a week.
Players think the euro's rise, led by short-covering, has come to a near-term end, said an FX trader at a major Japanese brokerage.
Japan's Nikkei share average <.N225> fell 0.7 percent, after five days of gains had brought it to one-month highs, while MSCI's index of Asian shares outside Japan <.MIAPJ0000PUS> eased 0.1 percent.
There seems to be a double bottom forming in a number of global stock markets, said Hiroichi Nishi, general manager at the equity division of Nikko Cordial Securities in Tokyo.
Such a technical pattern on price charts could indicate that stocks are poised to move higher, but investors remain wary after a nerve-wracking slump in global financial markets since mid April.
U.S. stocks ended flat on Tuesday after mixed economic data and a cautious outlook from bellwether FedEx Corp . <.N>
But the S&P 500 <.SPX> held above its 200-day moving average, seen by many market players as a key momentum indicator, a day after breaking above that mark for the first time in a month.
World stock markets had been gaining for the best part of a week, partly on a technical rebound from heavily oversold levels and partly as many investors took a relatively positive view of the global economy -- and hence corporate earnings prospects -- with the risk of a double dip recession seen as easing.
A Reuters poll published on Wednesday showed a continuing divergence in the expected rate of recovery among the world's richest nations, with Europe's debt crisis continuing to hamper economies across the continent.
The growth path for 2010 in the United States, the world's largest economy, has been revised higher, running away from the euro zone and Britain and also outstripping Japan, according to surveys of over 250 economists taken June 10-16.
A separate Reuters sentiment survey on Thursday showed Asia's top companies at their most optimistic in five quarters, as robust economic growth in the region outweighs concerns about debt problems in Europe and the recent surge in market volatility.
A bigger-than-expected fall in U.S. housing starts among Wednesday's data pared gains in high yielding currencies such as the Australian dollar, which eased from a 1-month high.
The euro fell back from a two-week high to trade around $1.2275.
After failing to break above $1.2350-55 twice in the past 48 hours, the euro is at risk of retreat to around $1.2175, a 38.2 percent retracement of its rebound from a four-year low below $1.19 set last week, traders said.
The market will be watching a Spanish bond auction later in the day after the spread of Spanish government bond yields over benchmark Bunds soared to a euro lifetime high on Wednesday.
In the past few sessions, rises in the credit spreads of euro zone countries have not led to euro selling as much as before, said Junya Tanase, senior strategist at JPMorgan Chase Bank.
But unless conditions in Europe improve, correlation will return.
EU leaders will meet on Thursday to review the findings of a task force set up to look at reforms designed to prevent a repeat of the euro zone debt crisis. They will also discuss the creation of a permanent aid mechanism for countries in debt trouble.
The leaders have agreed on a 500 million-euro ($617.2 million) safety net to help struggling countries that use the euro and a 110-billion-euro aid mechanism for Greece. But despite repeated denials, they have not allayed concern that Spain will follow Greece by seeking financial help.
European Central Bank executive board member Joseph Manuel Gonzalez-Paramo said in an interview published in a German paper on Thursday that the central bank would continue buying government bonds until markets have stabilized.
U.S. crude futures fell 0.9 percent to $76.95 a barrel as investors took profits from oil's recent rally.
Oil has rebounded from a 2010 low of $64.24 on May 20. Sentiment improved further after the S&P 500 rose above its 200-day moving average on Tuesday, helping push NYMEX crude above its own 200-day moving average.
Spot gold was bid at $1,233.45 an ounce, up from its New York notional close on Wednesday, when it had touched a one-week high around $1,237.