Both are equipped with their daggers. Malekith does not have the Aether and Loki cannot use illusions (aka this is strictly a melee/H2H combat fight). To the death.
Who wins and why?
FRO
FrothByteNailcutter Massacre
Loki dominates. Malekith doesn't really have any decent fighting feats. Plus he needed the Aether to match Thor.