LONDON - European shares looked to be stabilising after three days of sustained selling on Thursday, as focus turned to the European Central Bank's monthly meeting for any sign it is readying further support measures.
Markets were under pressure as persistent speculation about the fate of US stimulus lifted bond yields globally, while shares struggled to find their footing after this week's tumbles.
Although the ECB and the Bank of England, which also meets later, are likely to hold off any new policy action, the ECB's new economic forecasts will be in particular focus amid worries the euro zone is slowly slipping towards Japan-style deflation.
European shares opened down 0.1 per cent as London's FTSE, Paris's CAC 40 and Frankfurt's Dax inched lower, but the falls were more modest than recent sharp moves and the euro hovered just above $1.36.
Ned Rumpeltin head of G10 FX strategy for Standard Chartered said the ECB could disappoint after last month's rate cut.
"Frankly we think they are going to sit on their hands for quite a while, so there will be a bit of a period of expectation adjustment."
"The main focus will be the forecasts and what will 2015 look like. If the inflation mid-point is below 1.5 per cent, I think that is an affirmation of their easing bias through next year."
Market moves were largely cautious before the central bank meetings but also the latest read out on US economic growth and the payrolls numbers on Friday.
After suffering its biggest one-day fall in six weeks on Wednesday, the Nikkei ended down another 1.5 per cent, retreating further from this week's six-year closing high.
"Starting from two days back, people are starting to get quite nervous about the market," a Tokyo-based senior trader at a European bank said.
The dollar has also faded below 103.00 yen, giving investors an excuse to book profits on the market's gains. The Nikkei is up 8 per cent since early November, and 46 per cent on the year so far.
Offshore funds appeared to be cheering for the market. Foreigners bought a net 368 billion yen worth of Japanese shares in the week through November 30, on top of 709 billion yen in the week before that.