Asian shares fell on Wednesday as oil prices skidded after Saudi Arabia effectively ruled out production cuts by major producers anytime soon, sending investors into safe-havens such as the yen.

MSCI's broadest index of Asia-Pacific shares outside Japan extended earlier losses to fall 1.1 per cent as of 0246 GMT, slipping further from Monday's six-week high.

Japan's Nikkei shed 0.7 per cent on the drop in oil prices and as the stronger yen weighed on exporters.

Chinese shares opened higher but surrendered the gains, with the CSI 300 index down 0.1 per cent and the Shanghai Composite little changed.

The U.S. S&P 500 Index fell 1.25 per cent on Tuesday to 1,921.27, having failed to rise above its peak hit on Feb. 1, with energy and material sectors being a major drag as oil prices quickly gave up Monday's hefty gains.

Saudi Oil Minister Ali Al-Naimi told oil executives on Tuesday that markets should not view the agreement by four major oil producers to freeze output at January levels as a prelude to production cuts.

While Naimi said he was confident more nations would join the pact, Iran was seen as unlikely to agree to the output cap, which does not allow Iran to regain the market share it lost during sanctions.

Oil prices slid in early Asia trade, extending losses of more than 5 per cent overnight. US crude futures were down 1.8 per cent at $31.29 per barrel, while international benchmark Brent futures were down 1 per cent at $32.94.

"I suspect few people were expecting a deal to cut production so his comments are hardly a surprise. Yet, the latest development seems to suggest that for oil producers to get more united they will have to feel more pain," said Ayako Sera, senior market economist at Sumitomo Mitsui Trust Bank.

Banks under pressure

The toll from low oil prices is also spreading to banks that have exposure to the energy sector, as roughly a third of U.S. shale oil producers are at high risk of slipping into bankruptcy this year, according to a study by Deloitte.

JP Morgan, the largest US bank by assets, said it will increase provisions for expected losses on energy loans by $500 million, or more than 60 per cent of its existing reserves.

JPMorgan shares fell 4.2 per cent on the announcement.

Investors instead favoured safer assets such as US Treasuries, with the 10-year notes yield falling to a two-week low of 1.714 per cent overnight.

The increased risk aversion led gold to erase all its losses from earlier this week to trade at $1,227.30 per ounce, coming near its one-year high of $1,262.90 touched about two weeks ago.

Yen, Swiss franc shine

In the currency market, traditional safe-haven currencies such as the yen and the Swiss franc outperformed.

The yen firmed to 111.77 to the dollar on Tuesday, edging near its 15-month high of 110.985 hit on Feb. 11. It last stood at 111.90.

The Swiss franc gained broadly, hitting a one-month high on the euro at 1.09165 franc per euro on Tuesday. It has since weakened to 1.0929 franc per euro.

The franc got a lift also as the head of its central bank warned it could not "endlessly" take further steps to ease monetary conditions.

The euro in contrast was hit by a key index on German business climate showing sentiment among German manufacturers plunged by its largest amount since the bankruptcy of Lehman Brothers in 2008.

Against the dollar, the euro fell to three-week low of $1.0990 on Tuesday and last stood at $1.10160.

The British pound remained on defensive, hitting a seven-year low below $1.40 in early Asian trade on Wednesday on worries Britons would vote to leave the European Union in a June referendum.

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