European stock markets have steadied in morning trading after inflation concerns pushed Japanese shares to their lowest level in six months.
There are fears that a US economic slowdown could hit global growth
Shares in London, Frankfurt and Paris made gains but investors remained wary after the heavy falls of recent days.
Markets have been unsettled by fears of growing inflation in the US and hawkish comments by Fed boss Ben Bernanke.
The benchmark Nikkei index fell 1.8% to end trading at 15,096.01, its lowest closing mark since last November.
The drop was prompted by a second successive day of selling on Wall Street after Fed boss Ben Bernanke acknowledged inflation concerns.
Investors are concerned that moves to curb inflation in the US could stifle economic growth in the world's largest economy.
This could have a knock-on effect on the global economy, at a time when high oil prices are already putting a strain on economic output.
"The market is now beginning to be wary of the possible risk that the US economy could be exposed to the risk of stagflation, that is a combination of economic stagnation and inflation," Shigeo Kikuchi, an analyst at Takagi Securities, told the Agence France Presse news agency.
"As long as such fears are out there, the local market will be pressured by sustained selling from large overseas investors, such as hedge funds, as they accelerate capital repatriation back to their home countries."
Markets in US, Europe and Asian have seen notable falls in recent days.
The benchmark Dow Jones index in the US fell below 11,000 for the first time since March during Tuesday trading - although it later recovered slightly to close at 11,002 - after seemingly hawkish comments by Mr Bernanke on inflationary pressures.
Worries that US consumer spending could be undermined by rising prices hurt shares in Japanese exporters in the tech and car sectors.
Indian shares also fell, with Bombay's benchmark Sensex index dropping 200.56 points, or 2%, to 9,756.76.
But Europe's main markets looked set to recover some of Tuesday's losses following a morning of topsy-turvy trading.
By mid-afternoon, the FTSE 100 was up 27.1 points at 5696.9 while the Dax-30 gained 25.4 points to 5528.21.
The Cac-40 was also in positive territory, adding 10.85 points to 4808.77.