Stocks and the euro fell while safe-haven government bonds rose on Friday as final approval for a long-awaited Greek debt deal remained elusive, keeping alive the threat of a messy default by the country.
Euro zone finance ministers gave a lukewarm response to an inter-party agreement from Athens on austerity measures, and set more conditions for Greece to secure a second bailout needed to ensure it can meet debt repayments next month.
That left the Greek rescue deal in limbo ahead of the weekend and tempered some of the enthusiasm seen in financial markets on Thursday after Greek political leaders clinched an agreement on austerity after weeks of wrangling.
Markets seem to have had enough of it for now, said Credit Agricole rate strategist Orlando Green. It may just be kicking the can down the road again as debt is in unsustainable territory and whether they (Greece) can deliver something long lasting is another question.
The FTSEurofirst 300 <.FTEU3> index of top European shares was down 0.4 percent at 1,069.09 points. The STOXX Europe 600 euro zone Banking Index <.SX7E>, exposed to the euro zone's sovereign debt crisis, shed 0.8 percent.
U.S. stock futures pointed to a weak start on Wall Street. Futures for the S&P 500, the Dow Jones and the Nasdaq 100 down 0.4 to 0.6 percent. A survey of U.S. consumer sentiment will be eyed by investors.
Earlier, Asian stocks also lost ground, leaving global stocks as measured by the MSCI index <.MIWD00000PUS> down 0.6 percent at 326.23.
Despite the drop, the index is up more than 20 percent from it October trough as low interest rates from major central banks and a huge cash injection by the European Central Bank fuelled a rally in stocks, commodities and higher-yielding currencies.
The euro was 0.2 percent lower against the dollar at $1.3255, pulling back from a two-month high of $1.3322 reached on Thursday.
Some of our clients remain concerned that the Greek situation could worsen from here, said Valentin Marinov, currency strategist at Citi. With some event risk still very much out there, people may not be willing to keep sizeable risky positions ahead of this weekend's Greek parliamentary vote.
BACK TO THE DRAWING BOARD
The Greek plan agreed by Athens has fallen short of targets needed to bring its debt down to a more sustainable footing.
Jean-Claude Juncker, who chairs the Eurogroup, set three conditions, saying the Greek parliament must ratify the package when it meets on Sunday with a further 325 million euros of spending cuts needed to be put in place by next Wednesday, after which euro zone finance ministers would meet again.
Facing elections as soon as April, Greek political leaders are loath to accept tough measures with rising social unrest and mounting unemployment compounding the country's woes.
Also, concerns about the implications of a Greek debt restructuring on Portugal will keep investors cautious.
Growth-linked currencies like the Australian dollar and commodities like copper and oil eased as investors cut exposure to riskier assets and preferred the safety of U.S. Treasuries and German Bunds.
March Bund futures were 74 ticks higher at 137.84 with 10-year yields 3 basis points lower at 1.99 percent after pushing to their highest levels this year at 2.05 percent on Thursday.
It feels like running a software update where the status bar indicates '99 percent done', but then it takes forever to finish, Commerzbank strategists said in a note, referring to the Greek situation.
Until one knows for sure that the system won't crash, short-covering in Bunds by fast money should prevail, with prospects for a deal next week limiting the upside though.
Risk appetite was also crimped after China's trade activity fell in January by the most since the depths of the financial crisis, raising concerns about the resilience of domestic demand that has shielded the world's second largest economy as exports have slackened.
(additional reporting by Neal Armstrong and Kirsten Donovan; Editing by Catherine Evans)