Equities sank as European finance chiefs met to discuss Greece's newly approved 2013 budget that is seeking to appease conditions by international lenders to secure more funds and avoid defaulting on its debt.
A decision on releasing fresh funds is unlikely to be made today.
A draft document from the European Central Bank, the European Commission and the International Monetary Fund, known as the troika, was obtained by Bloomberg News. Giving Greece a two-year extension to meet budget targets would ease the impact of austerity measures, the troika said.
In Europe, the Stoxx 600 Index ended 0.3 per cent lower. Shares dipped in London, Paris, Madrid and Milan. Germany's DAX edged higher on the day.
Trading also was muted on Wall Street, where volume was thinned by the Veterans Day holiday that closed the US bond market.
In afternoon trading in New York, the Dow Jones Industrial Average edged 0.06 per cent lower, as did the Nasdaq Composite Index, while the Standard & Poor's 500 Index slipped 0.17 per cent.
While equities have suffered from concern about the negative impact of the so-called fiscal cliff on the pace of economic recovery, some say this worry is overblown as they expect agreement on a plan to avoid it.
"It's astonishing that now the market is turning so quickly and we don't understand that," Bettina Mueller, a money manager in Frankfurt at Deutsche Bank's DWS Investments unit, which oversees about US$350 billion, told Bloomberg.
"Our expectation regarding the fiscal cliff is that both sides will come to a compromise."
President Obama has called top Congressional leaders to the White House this week to kick start talks. Failure to agree on a plan would trigger automatic tax increases and spending cuts worth US$607 billion on January 1.
"The markets don't like uncertainty and while the election is over, investors must still deal with the fiscal cliff, the debt ceiling and the unpredictable situation in Europe," Randy Frederick, managing director of active trading and derivatives at Charles Schwab, in Austin, Texas, told Reuters.
"But, keep in mind, the markets are clearly oversold in the short-term and even a hint of resolution on any of these issues could spark a nice bounce," he said.
On the corporate news front, Leucadia National has agreed to buy the rest of Jeffries Group that it doesn't already own at a price that values the investment firm at US$3.6 billion.
The International Energy Agency has revamped its forecasts and now says that the US is poised to become the world's largest oil producer - ahead of Saudi Arabia - in four years, reflecting the recent surge in shale gas production.