On Tuesday, stocks were hit while the yen surged, particularly against the dollar, after Japan's central bank kept policy unchanged. Japan has been one of the main influences in the markets over the recent past as investors have grown concerned over the ability of the authorities to get the country out of its two-decade stagnation.
In April, the Bank of Japan announced a massive stimulus in an attempt to get inflation up to 2 percent. The euphoria that drove the Nikkei up to five-year highs has since dissipated and the index is now around 20 percent down on its recent peak.
The other major driver in markets has been the uncertainty over the future course of U.S. monetary policy following a solid, if unspectacular, improvement in the economic data.
The markets now expect some reduction in the Federal Reserve's monthly asset purchases sometime this year — the stimulus has been one of the main reasons why many assets, such as global stock markets and emerging markets, have bounced back over the past few years.
Joshua Mahony, research analyst at Alpari, said the next crucial event in the markets is whether they recover to reach new highs — prior to the recent weakness, many stock indexes around the world had hit all-time levels.
"Should the markets suffer significant losses within the coming week without reaching previous highs, the market perception would be that a lower high has been formed; the prerequisite for a reversal in the markets," said Joshua Mahony, research analyst at Alpari. "Subsequently, a shift below previous lows of last week is likely to be treated as confirmation of a move to the downside for many indices."
Some recovery was evident in Europe and expected at the U.S. open.
In Europe, the FTSE 100 index of leading British shares was up 0.1 percent at 6,348 while Germany's DAX rose the same rate to 8,227. The CAC-40 in France was 0.4 percent higher at 3,827. For the U.S., futures markets were pricing in a 0.5 percent advance for both the Dow and the broader S&P 500 index.
Earlier in Asia, stocks faltered though the scale of the retreat, particularly in Tokyo, was relatively modest. The Nikkei 225, the regional heavyweight, shed 0.2 percent to 13,289.32 — a calmer performance following recent big swings. The yen too, which surged around 3 percent against the dollar on Tuesday, was relatively calm too — the dollar was up 0.5 percent at 96.57 yen, a modest rebound from the previous day's retreat.
"The fact that investors were disappointed (on Tuesday) by the lack of fresh BoJ measures does highlight how addicted the market has become to the promise of a continual flow of cheap money," said Jane Foley, senior currency strategist at Rabobank International.
South Korea's Kospi shed 0.6 percent to 1,909.91 while Sydney's ASX S&P 200 fell 0.7 percent to 4,724.50. Singapore's FTSE Straits Times index lost 0.5 percent to 3,154.53 while India's Sensex lost 0.3 percent to 19,077.56. New Zealand also fell.
Markets in China, Hong Kong and Taiwan were closed for a holiday.
Elsewhere, the euro was down 0.2 percent at $1.3279 while a barrel of benchmark New York oil was flat at $95.38.