Markets remain rattled by Greek referendum pledge

World markets remained rattled Wednesday over whether the Greek prime minister's decision to take his country's latest rescue package to a referendum was a huge miscalculation. Worries over Italy kept investors on edge too.The combination prevented stocks from recovering much of Tuesday's hefty losses when investors fretted over a possible disorderly Greek debt default and even the country's exit from the euro.

"Investors remain nervous about the potential fallout from Greece's referendum," said Sal Guatieri, an analyst at BMO Capital Markets.In Europe, Britain's FTSE 100 dropped 0.4 percent to 5,402, while Germany's DAX rose 0.7 percent to 5,876. France's CAC-40 rose 0.7 percent to 3,088.18.Wall Street also appeared headed for modest gains, with Dow futures up 0.2 percent at 11,700 and the broader Standard & Poor's 500 futures 0.3 percent higher at 1,228.

Traders will have plenty of news to mull over the rest of the day though Europe's debt crisis will remain the focal point. Some diversion may come from the latest policy statement from the U.S. Federal Reserve and the ensuing press conference from its chairman Ben Bernanke.Greek Prime Minister George Papandreou will be in the hot seat later when he will likely face a grilling from French President Nicolas Sarkozy and German Chancellor Angela Merkel about his surprise move to put the rescue package to a popular vote.

The Greek leader faces a confidence vote in Greek parliament on Friday. If he falls, the referendum would be off, and Greece would be headed to early elections.Meanwhile, Italian Premier Silvio Berlusconi was locked in meetings with his finance minister hammering out measures to weather the crisis. A spike in Italian borrowing costs this week has heightened calls for Berlusconi's immediate resignation — a move the markets have been clamoring for ever since ratings agencies downgraded Italy's sovereign debt rating citing a dysfunctional government.

Stocks have struggled since Monday, when Greece's prime minister unexpectedly announced he would call a national vote on Europe's latest plan, agreed only last Thursday. The euro has also faced big selling pressure this week but has rebounded 0.9 percent Wednesday to $1.3773.

The Oct. 27 bailout deal would require banks holding Greek government bonds to accept 50 percent losses and provide Greece with about $140 billion in rescue loans from European nations and the IMF. Greece has been relying on bailout loans since May 2010 to avoid bankruptcy.Papandreou's unexpected call for a public vote on the aid package came just days before the leaders of the world's largest industrial and developing nations gather for the Group of 20 summit in Cannes, France on Thursday and Friday. The troubled eurozone will be the summit's emergency topic.

"The escalation in the Greek crisis and the increasing contagion risks in Italy threaten a disorderly default on Greek debt and the possibility of Greece exiting from the monetary union," said Neil MacKinnon of VTB Capital. "Italian bond yields rising in spite of the ECB purchasing Italian debt and a widening of the spread against Germany pushes Italy closer to a bailout, something the existing resources of the EU's rescue fund cannot manage."

Earlier, several key Asian indexes rebounded, with Hong Kong's Hang Seng shooting up 1.9 percent to 19,733.71. But Japan's Nikkei 225 index tumbled 2.2 percent to 8,640.42, its lowest close in three weeks.Oil prices traded in fairly narrow ranges — benchmark crude for December delivery was up 28 cents at $92.45 a barrel in electronic trading on the New York Mercantile Exchange.