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US air strikes in Syria left Asian stock markets jaded on Wednesday, setting the stage for another soft session for European shares.
The dollar was kept in check after US yields fell on geopolitical concerns and dovish statements by a Federal Reserve official.
Spreadbetters saw European equities starting lower, forecasting London's FTSE to open down as much as 0.3 per cent, Germany's DAX and France's CAX down 0.2 per cent each.
MSCI's broadest index of Asia-Pacific shares outside Japan initially fell to a four-month low after Wall Street's overnight slide, but managed to steady thanks to gains in Chinese shares.
The CSI300 of the leading Shanghai and Shenzhen A-share listings climbed 0.9 per cent, while the Shanghai Composite Index was up 0.8 per cent.
Space and defense stocks surged, with the industries enjoying support on hopes they would benefit from deepening reforms in state firms and from more government investment in defence.
On the other hand, Tokyo's Nikkei shed 0.3 per cent and Australian shares lost 1.1 per cent.
The United States and its Arab allies bombed militant groups in Syria for the first time on Tuesday, opening a new front amid shifting West Asian alliances and sapping demand for risk.
"If geopolitical concerns deepen, you can't expect Japanese markets alone to survive. The market could fall up to 10-15 percent at most," said Akiko Miyazaki, director of stocks at Barclays in Tokyo.
Syria air strikes
The air strikes in Syria also garnered demand for safe-haven government debt and pushed US Treasury yields lower, in turn helping arrest the dollar's recent bull run.
The dollar was down 0.3 per cent at 108.58 yen, after going as low as 108.25 yen overnight.
The greenback has been on the back foot after scaling a six-year high of 109.46 on Friday, receiving an additional knock after Japanese Prime Minister Shinzo Abe voiced concern about the economic impact from the currency's recent weakness.
The euro was little changed at $1.2851, limping away from the 14-month low of $1.2816 hit Monday.
Fed comments
Fed officials could offer more catalysts for currency markets, after Federal Reserve Bank of Minneapolis President Narayana Kocherlakota had said on Tuesday that the central bank can keep stimulating the US economy because inflation is posing little threat - comments the markets perceived as dovish.
Federal Reserve Bank of Cleveland President Loretta Mester speaks later in the day.
"Fed officials will be in focus again today.. .if they do not give any hints that they are in a hurry to hike rates the dollar could lose more ground against the yen and present 109 as a ceiling," said Masafumi Yamamoto, market strategist for Praevidentia Strategy in Tokyo.
Brent crude, gold
In commodities, Brent crude oil slid, with ample global supplies outweighing tensions in West Asia for the moment. Brent was down 12 cents at $96.73 a barrel.
Gold clung to overnight gains on Wednesday as Asian shares retreated, but investors remained cautious amid a firmer dollar and upbeat US manufacturing data that kept prices near their lowest since January.
Spot gold held steady at $1,223.40 an ounce.
Copper was stuck near three-year lows, weighed after miner Newmont raised its supply forecast and by signs of fragility in the global economy.
Three-month copper on the London Metal Exchange inched up 0.1 per cent to $6,725.00 a tonne after slumping to the lowest in three months on Monday at $6,707.25 a tonne.
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