A week of gains for world stocks petered out on Wednesday and a sell-off in oil and core government debt eased, as talks began on trying to avert a U.S. military strike on Syria against a broadly calm market backdrop.

The safe-haven yen was at a seven-week low against the dollar and stood near multi-year lows against the euro and sterling, while shares in Europe nudged higher ahead of what was expected to be a mixed start for Wall Street.    

U.S. President Barack Obama said late on Tuesday that Russia's offer to push Syrian President Bashar al-Assad to put chemical weapons under international control could potentially head off the type of limited military action he was considering

"Over the last few days, we've seen some encouraging signs," Obama said in televised speech from the White House.

Markets were largely in consolidation mode after the big moves of the two previous sessions when what looked to be a rapid move towards U.S. action was halted by Russia's plan.  

Oil recovered some ground with Brent crude rising back above $112 a barrel from a 2-1/2-week trough of $110.59. The steadier performance came after a 4-percent drop in the past two sessions, its largest two-day fall since June.  

Copper edged slightly higher to $7,198.25 a tonne, while gold inched back up to $1,365.90 having slid to a three-week low of $1,356.85 an ounce.

"The calmer market mood is largely because the geopolitical risks have diminished," said Vasileios Gkionakis, global head of FX Strategy for UniCredit in London.

"At the same time, the market is still digesting all the data that we have had over the last 10-days or so and with the exception of the downward revision of the U.S. payrolls, in general, that has painted a positive picture."    

EUROPE    

There was little in the way of major economic news out of Asia on Wednesday.

In Europe, Britain's unemployment rate bucked expectations of a steady reading as it dipped to its lowest level since late 2012 in the latest sign its economy is picking up.

Sterling rose to a seven-month high against both the dollar and the euro and to a mammoth 4-year high against the weakened Japanese yen, as the surprise fed suspicions the Bank of England may have to raise interest rates earlier than it is currently suggesting.    

The FTSEurofirst 300 pan-European share index shrugged off early lethargy to inch up 0.15 percent by 1000 GMT as a 0.3 percent rise on Germany's Dax balanced falls of 0.1 on London's FTSE and Paris's CAC 40.

The region's core debt markets also saw a largely quiet session this week's save-haven sell-off abated.

Benchmark German government bonds tracked minor gains by U.S. Treasuries, while focus remained on Italy after its benchmark yields were left above Spain's for the first time in 18 months on Tuesday.

Political instability and worries about Italy's banks ahead of a major health check of all euro zone banks by the European Central Bank in the coming months are driving the move.

Rome sold 11.5 billion euros of treasury bills at its highest rate in over nine-months, ahead of a tripartite bond auction on Thursday which aims to raise 7.5 billion.  

Italy was well ahead of the game in terms of meeting its 2013 funding needs, but on Tuesday the Treasury asked parliament to raise the ceiling on this year's net debt issuance to 98 billion euros from 80 billion, given the struggle to rein in public finances.

Analysts at Newedge said German elections on Sept. 22 would be the near-term "pivot point" for euro zone debt markets but that Italy had its own specific issues that made it a danger.

"While Merkel should win (German elections), her coalition may not survive and force her into a coalition with center left. This could weaken the euro but benefit the periphery," they said in a note.

"However, Italy may underperform as the ECB prepares for new euro zone bank stress tests that compel especially the poorly capitalized Italian banks to raise more equity capital."        

FED FOCUS

Stock futures  pointed to a softer start on Wall Street after the S&P 500 chalked up its sixth day of gains on Tuesday.

Also helping risk currencies against the yen, which had seen some safe-haven buying in recent weeks, was stronger-than-expected industrial output that reinforced signs that China's economy was stabilizing.

The dollar backtracked to 100.27 yen having scaled a seven-week peak of 100.55 yen, while the euro touched a 16-week high around 133.37.

Against the dollar, the common currency reached a two-week high of $1.3282 as it showed little interest in a warning from one of the ECB's policymakers that Greece may need, not one, but two more aid packages.

MSCI's broadest index of Asia-Pacific shares outside Japan ended 0.1 percent lower but remained at a three-month high having gained more than 8 percent in the last two weeks. Emerging market stocks dipped 0.3 percent.

E-Trade Securities analyst Choi Kwang-hyeok said some investors were choosing to book profits ahead of next week's Federal Reserve meeting that could see the U.S. central bank begin to scale back its massive stimulus campaign.

"The week ahead contains cues that could change foreign capital flows," he said.