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Asian shares made a tentative rebound from three-month lows on Wednesday though the spectre of higher borrowing costs in the United States and concerns about the apparent lack of progress in talks between Greece and its creditors sapped confidence.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3% after hitting a fresh three-month low, though it is down almost 9% from the seven-year peak hit in late April.
Japan's Nikkei also rose 0.4%, after Tuesday's big fall to three-week lows while mainland Chinese shares suffered a small setback after US index provider MSCI Inc said on Tuesday it will hold off including China-listed shares in its widely tracked indexes.
But MSCI also said it expects China-listed shares to be incorporated once outstanding market accessibility issues are resolved - a move that could inject an estimated $400 billion of funds from asset managers to mainland shares.
Shanghai shares fell 0.5%, though they are still up more than 35% so far in this quarter, having rallied strongly on hopes of stimulus from Chinese government.
Share markets around the world, particularly some emerging markets that have relied on foreign capital, have been hit on growing expectations that the US Federal Reserve will start to raise interest rates before the year is out.
US bond prices slipped as they were also hit by this week's flood of supply, sending the 10-year US benchmark bond yield to an eight-month high of 2.449% on Tuesday. It last stood at 2.437%.
Strong US data, including Friday's report showing solid increases in employment, and recent comments from top Fed officials suggesting a rate hike is likely later this year have driven up bond yields in the past several days.
"In the big scheme of things, we could be witnessing the end of 'Goldilocks' markets, where both bonds and shares prices have risen (on the back of easy monetary policy)," said Shuji Shirota, head of macroeconomy strategy at HSBC in Tokyo.
Bond yields also soared in Europe on Tuesday, with German 10-year Bund yields pushing close to an eight-month high hit last week amid rising economic optimism.
The higher yields dented the allure of equities and helped send European share prices to four-month lows, with concerns about Greece further weighing on investor sentiment.
A new reform proposal submitted by Athens earlier this week failed to fully satisfy creditors, heightening concerns whether Greece can agree on a deal to unlock new funding to ward off a debt default.
"Failure to agree this week would likely make it difficult to have a smooth resolution before the end of June, partly because another extension of the programme would require the approval of some national parliaments," Barclays analysts said in report.
In currency markets, the US dollar was largely steady, underpinned by the higher bond yields. The dollar index, which tracks the greenback against a basket of six major currencies, was last down about 0.1% at 95.059, below Friday's high of 96.909 hit after the upbeat US jobs report.
