Asian shares dip on concern before EU summit

Asian shares declined on Wednesday ahead of a key meeting of European policymakers later in the session, with concerns heightening that the outcome could fall short of expectations for measures to contain Europe's sovereign debt crisis.

MSCI's broadest index of Asia Pacific shares outside Japan fell 0.5% on Wednesday, after rising to its highest point since Sept. 16 the day before.

The Nikkei opened down 1.01% as the yen hit a record high against the dollar of 75.73 yen, fuelling concerns about its damage to corporate earnings.

The euro and commodity currencies stayed under pressure. The euro retreated further from a six-week high of USD 1.3959, but the drop has been relatively shallow, with the single currency at USD 1.3900 after finding initial support at the overnight low of USD 1.3847.

"Since little is now expected out of today's summit, the market impact should be limited," analysts at BNP Paribas wrote in a note. "In fact, given the recent price action and market reaction to mere speculation, a sheer commitment from policymakers may be enough to ignite a fresh risk rally. USD 1.4000 before the weekend remains viable."

The EU summit remains scheduled for Wednesday but the gathering of finance ministers -- known as Ecofin -- was canceled because details of the meeting had not been finalised, sources told Reuters.

The leaders were expected to adopt a plan to reduce Greece's debt burden, recapitalise European banks to help absorb bond losses and strengthen the euro zone rescue fund, or the European Financial Stability Facility (EFSF), to stave off contagion in the bond market.

But there were divisions over the extent of losses that private holders of Greek bonds would have to incur and the size of a planned bank recapitalisatoin and the scope for leveraging the bailout fund remained uncertain.

On top of the euro zone risks, investors also faced US consumer confidence data unexpectedly dropping to its lowest level in two-and-a-half years in October. House prices were unchanged at low levels in August, suggesting the consumer is still struggling but the economy was not headed for a recession.

Worries about slower US growth and European debt woes hurting corporate earnings sapped investor appetite for riskier assets and strengthened flows in to safe haven assets such as gold, the yen and US Treasuries.

Gold steadied around USD 1,700 an ounce on Wednesday. It has been moving in tandem with riskier assets, but resumed its save-haven allure as stocks and the euro fell, posting its biggest one-day rise since early September on Tuesday.

US Treasury bond prices rallied on Tuesday, with benchmark 10-year notes up 1-1/32 in price for a yield of 2.12%.

MSCI's all-country world stock index fell 1.1% on Tuesday after earlier hitting its highest since early September on signs euro zone policymakers were close to an agreement.

As strains returned, the spreads on the iTraxx Asia ex-Japan investment grade index , a gauge for whether investor risk appetite is returning, widened by five basis points early on Wednesday.