On Monday, trading was extremely choppy, particularly in Europe, as investors fretted over an agreement between cash-strapped Cyprus and international lenders to seize deposits in the country's banks.
A vote on the seizures has been scheduled for later Tuesday, though it could be delayed again if the government does not secure the necessary support.
If the bill isn't passed, Cyprus faces bankruptcy and a potential exit from the euro. That's a clear concern for markets as is the possibility that the country will face a run on its banks. Depositors around Europe are watching developments closely now that the taboo of raiding deposits has been violated.
"The underlying tone of the market is set to stay jittery with investors unnerved about the potential loss of trust between banks and small depositors," said Jane Foley, an analyst at Rabobank International.
In Europe, the FTSE 100 index of leading British shares was down 0.2 percent at 6,442 while Germany's DAX fell 0.5 percent to 7,969. The CAC-40 in France was 0.6 percent lower at 3,802.
The euro steadied after falling Monday to its lowest level against the dollar in 2013. It was trading flat at $1.2947. Oil prices were largely unchanged too with the benchmark New York rate down 9 cents at $93.65 a barrel.
Wall Street is expected to open flat as well, with Dow futures and the broader S&P 500 futures down 0.1 percent. The focus over the rest of the day will likely center on developments in Nicosia ahead of the planned vote.
"If this goes as scheduled, it will be well into the U.S. trading day before we get a result, plus the rather critical direction this will bring for stocks," said Fawad Razaqzada, market strategist at GFT Markets.
On Tuesday, officials proposed tweaking the seizures plan to spare small account holders.
Under a new draft bill discussed in Parliament's finance committee, deposits below €20,000 ($25,900) would be exempt from any charge, unlike before. However, deposits above would suffer the same fate as before. Those between €20,000 and €100,000 would have a 6.75 percent charge imposed, and those above €100,000 will be stripped of 9.9 percent.
However, in a sign that discussions are ongoing, the country's central bank governor recommended that no levy be imposed on accounts below €100,000 — the amount that is insured by the government.
Earlier, benchmarks in Asia were mostly higher. Japan's Nikkei 225 index jumped 2 percent to close at 12,468.23 as the yen dropped against the dollar.
Hong Kong's Hang Seng shed morning gains to fall 0.2 percent to 22,041.86. South Korea's Kospi rose 0.5 percent to 1,978.56. Benchmarks in Singapore, Taiwan and Indonesia were also higher, while Thailand and the Philippines dropped. After opening higher, Australia's S&P/ASX 200 reversed course and fell 0.5 percent to close at 4,992.20.