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LONDON (Reuters) - World stocks struggled on Wednesday, with European and Japanese markets falling, while the low-yielding Japanese yen rose as investors counted the cost of global fiscal stimulus packages to boost flagging economies.
Europe was considering a more than 130 billion euro plan following the U.S. Federal Reserve's $800 billion effort to bolster credit and mortgage markets on Tuesday.
China also cut interest rates by 108 basis points, aiming to ensure liquidity in the banking system and to help to boost slowing economic growth.
Positive reaction to the financial resuscitation efforts was starting to give way to concern about the bottom-line impact on government balance sheets.
"The Fed's measures were supposed to be good for risk," said Geoffrey Yu, currency strategist at UBS in London. "It's obviously positive for some aspects of the economy, but people are starting to worry about balance sheet risks ... In general, problems on the U.S. economic front haven't changed at all."
Real economy malaise also continued to sap sentiment toward risk. Toyota Motor Corp had its top-notch credit rating cut for the first time in a decade.
World stocks as measured by the MSCI index were slightly lower, while European stocks were down 0.4 percent, off their lows. Tokyo's Nikkei 225 index earlier fell 1.3 percent.
Falling crude prices weighed on oil shares in Europe, adding to a general air of deflating sentiment as the stimulus packages were digested, leaving investors to wonder what it would take to get interbank markets working properly again.
"You can't force banks to lend if they don't want to. Earnings worries are still there," said Bernard McAlinden, investment strategist at NCB Stockbrokers in Dublin.
Interbank lending rate ranges for three-month dollar, euro and sterling funds held relatively steady on Wednesday versus a day ago, while spreads between interbank and expected policy rates stayed at high levels.
Skepticism about the Fed and other stimulative packages kept investors' preference for the yen intact.
The low-yielding Japanese unit, a bellwether of attitudes toward risk, stayed firm versus the euro at 123.50 yen, but gains were trimmed after the China rate cut. Deleveraging flows also kept the dollar well-supported against a basket of currencies and the euro.
"There have been so many steps taken by the U.S. authorities, leaving the impression they are doing anything in their capacity, but not necessarily with consistency," said Mitsuru Sahara, a senior manager at Bank of Tokyo-Mitsubishi UFJ.
"The market reaction has become increasingly cool, as it has become accustomed to new measures coming one after the other without feeling that the market has hit a bottom," he said.