In early trading in Europe, Britain's FTSE 100 was down 0.27 percent at 5,648.75. France's CAC-40 shed 0.57 percent to 3,157.06, while Germany's DAX rose slightly 0.02 percent to 6,439.36.
'Some large international investors have declared publicly they are shunning eurozone investments altogether,' said Monument Securities Analyst Stephen Lewis. 'Their asset reallocations are presumably contributing to downward pressure on (government bond) yields in US and UK markets, among others.'
After falls Tuesday, Wall Street was set to recover modestly Wednesday with Dow Jones industrial average opening down up 0.32 percent at 12,611 and the S&P 500 off slightly, 0.09 percent also 0.19 percent higher at 1,339.
With second-quarter corporate earnings beginning to trickle in amid low expectations, attention will focus on whether the U.S. Federal Reserve is likely to follow the European Central Bank and the People's Bank of China in easing policy via another round of Treasury bond purchases known as quantitative easing.
'The eurozone needs dramatic action to stop the downward spiral,' said Jan Amrit Poser, chief economist at Bank Sarasin. 'The economic cycle in the rest of the world hinges substantially on such intervention, but accompanying actions by central banks in the U.S. and emerging economies are also needed to halt an impending downturn.'
Analysts will be combing the minutes of the latest Fed meeting, scheduled to be released later Wednesday, for hints of the central bank's view on the economy and possible policy moves.
Corporations are striking a negative tone, with Advanced Micro Devices saying Tuesday that weaker sales in China and Europe led to an 11 percent drop in revenue in the April to June period. The company had previously forecast a gain of 3 percent. In Britain, retailer Marks & Spencer reported a 2.8 percent drop in sales. Aluminum maker Alcoa beat earnings expectations Monday, but sales fell 9 percent. JPMorgan and Google report results later this week.
Meanwhile, Europe's debt crisis has wounded investor and consumer confidence, and some of the region's countries, such as Greece and Spain, are in deep recession.
Fiscal stimulus is not on the cards for European governments who are cutting spending instead. Spain's Prime Minister Mariano Rajoy announced a new round of spending cuts on Wednesday. Earlier this week European finance ministers promised the country ?30 billion by the end of the month to prop up its weak banks, but Germany's constitutional court said Tuesday it won't decide whether Europe's bailout fund is legal for months.
'Once again these events have highlighted that the crisis in Europe owes a lot to issues regarding governance and underpins the worry that the pace of movement towards greater fiscal ties within the Eurozone will be disappointingly slow,' said Rabobank foreign exchange analyst Jane Foley.
The euro hit year lows against the dollar Tuesday and has only recovered marginally, up 0.28 percent to $1.2281.
Japan's Nikkei 225 index fell 0.1 percent to 8,851.00 ahead of a meeting of the Central Bank of Japan, while Hong Kong's Hang Seng added 0.1 percent at 19,419.87.
Benchmark oil for August delivery was up 67 cents at $84.58 a barrel in electronic trading on the New York Mercantile Exchange. Crude dropped $2.08 to settle at $83.91 on Tuesday in New York.
In currencies, the dollar dropped to 79.25 yen from 79.45 yen.
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