Global equities dipped on Wednesday with Japan leading the falls on concerns over the pace of recovery, while crude oil prices recovered and the euro bounced from a one-month low on bargain hunting.
Worries over Dubai's debt problems dampened risk appetite, though the stock sell-off was limited outside the Gulf after sharp losses in European and U.S. equities in the previous session. Safe-haven government bonds were steady.
Also helping alleviate some concerns over banks' exposure to Dubai, Asia-focused Standard Chartered said any losses it suffers in the emirate were unlikely to be material and it was on track for a record profit this year.
Dubai's benchmark index fell 6.4 percent, hitting a more than eight-month low and leading emerging market shares weaker, and the cost of insuring the emirate's debt against restructuring or default rose sharply. Its five-year credit default swaps rose nearly 50 basis points to 592.5 basis points, according to monitor CMA DataVision.
The MSCI emerging equities index lost 0.5 percent and the MSCI All-Country World Index eased 0.1 percent, with Japan's Nikkei average down 1.3 percent after a bigger-than-expected downward revision to Japanese economic growth in the third quarter.
In Europe, the FTSEurofirst 300 index was flat but Greek bank shares extended recent losses, down 2.6 percent after Fitch Ratings on Tuesday downgraded the country's sovereign rating on fiscal deterioration.
"Greece's debt problems are more of a nuisance than Dubai's woes, because a number of European banks have stakes in local lenders or are exposed to the country's debt, and it revives the spectre of a domino effect in East Europe," said David Thebault, head of quantitative sales trading at Global Equities in Paris.
"But overall, the risk is limited for European equities. We've been retreating over the past few days, but stocks are still moving in a range, although closer to the bottom of the range. The chances of seeing a Christmas rally are intact."
StanChart shares advanced 3.4 percent.
U.S. stock index futures rose 0.3-0.5 percent, pointing to a recovery in Wall Street.
EURO RECOVERS
Greece's downgrade along with Dubai's debt crisis had weighed on the euro, but the currency recovered from a one-month low on Wednesday. The euro was up 0.3 percent at $1.4747 after a three-day of decline against the dollar.
"While there is always the risk of another heavily-indebted country being downgraded this year, such as Spain, Ireland or Portugal, it looks like the euro will now stabilise at around $1.4700," said Stuart Bennett, senior fx strategist at Calyon in London.
The U.S. currency fell 0.4 percent to 88.01 yen.
Worries about Britain's fiscal health continued to pressure sterling, which dipped below the $1.62 mark for the first time since mid-October ahead of finance minister Alistair Darling's pre-budget report at 1230 GMT.
Oil prices recovered to above $73 a barrel, supported by industry data showing a big drop in U.S. crude stocks and a Saudi Arabian assurance over the strength of Gulf economies.
Gold edged off three-week lows as the dollar failed to retain gains.
Yields on benchmark 10-year U.S. Treasuries were up 1 basis point at 3.399 percent, while those on 10-year Bund were down 1 basis point at 3.146 percent.
The spread between 10-year Greek government bonds and benchmark German Bunds widened further, while the cost of protecting Greek government debt against default also rose, with the five-year credit default swap reaching 226.8 basis points from 209 basis points, CMA DataVision said.
