Asian shares erased modest gains to edge lower on Wednesday as cautious investors waited for more clues about the global growth outlook, while a pause in the yen's declines spurred profit taking in Japanese equities after their recent rally.
The World Bank on Tuesday sharply cut its 2013 outlook for the world economy to 2.4% from its last forecast in June of 3%, blaming an unexpectedly sluggish recovery in developed countries for holding back global growth.
The MSCI's broadest index of Asia-Pacific shares outside Japan wiped out an earlier 0.2% rise to fall 0.1%.
"There's no real momentum in the market before China's fourth quarter GDP figures on Friday, so shares are likely to coast, with individual stocks aligning with earnings expectations," said Kim Sung-hwan, an analyst at Bookook Securities in Seoul.
Bank stocks pulled Australian shares up 0.3% and South Korean shares advanced 0.3%. Hong Kong shares dropped 0.3% and Shanghai shares eased 0.3%.
"We've just seen the banks do well a bit today, they're getting demand for that yield play," said Stan Shamu, market strategist at IG Markets in Sydney, pointing to the Australian bank sector's strong dividends. "That generally happens when there's no confidence in markets and no one is confident enough to get more risk exposure."
Japan's benchmark Nikkei average shed 1.5%, sharply reversing Tuesday's rally that lifted the index to a 32-month closing high, as the yen took a break from its recent heavy selling. The weak yen has been a catalyst for the Nikkei's 24% gain over the past two months.
"It's a correction. Some exporters' gains are legitimate, but others aren't, so I am selling exporters which have gained while their fundamentals are still poor such as Panasonic," said Makoto Kikuchi, Chief Executive of Myojo Asset Management in Tokyo.
The dollar and the euro extended losses against the yen, after a Japanese official on Tuesday sparked selling by warning of damage from excessive yen weakness through rising import prices.
The yen had steadily fallen over the past two months on expectations the new government will embark on aggressive fiscal stimulus while pushing the Bank of Japan to take bold monetary easing steps.
Data on Wednesday showed Japan's core machinery orders rose 3.9% in November from October, exceeding a forecast 0.3% rise, though uncertainty over the global economy may continue to weigh on business investment.
The dollar fell 0.7% to 88.20 yen, after scaling its peak since June 2010 of 89.67 on Monday.
The euro slumped 0.7% to 117.27 yen, after surging to its highest since May 2011 of 120.13 yen on Monday.
Reallocation underway?
The euro eased 0.1% against the dollar to $1.3293, after reaching an 11-month high of $1.3404 on Monday.
The euro was pressured by a weak economic report from Germany as well as comments from the chairman of the euro zone finance ministers, Jean-Claude Juncker, who on Tuesday said the euro was "dangerously high" without elaborating.
The single currency fell 0.3% against the Swiss franc at 1.2365, having hit a 13-month high of 1.2413 francs on Tuesday. The Swiss franc has been hit by receding safe-haven bids as falling yields in deeply-indebted countries such as Spain and Italy eased concerns about the euro zone's debt crisis.
Reversals in the strengthening trend for the Swiss franc and the yen may suggest asset reallocations are taking place.
"Old regimes are dying and FX is the first sign of this process. We are seeing this in JPY, are starting to see this in CHF," Sebastien Galy, strategist at Societe Generale, said in a note to clients.
Most US stocks rebounded on Tuesday after data showed retail sales in December increased 0.5%, beating economists' expectations for a 0.2% gain, but concerns about a US fiscal problem weighed on sentiment.
The five-year cost to insure US Treasuries on Tuesday rose to 0.43%age point, the highest level since early October.
Spot gold rose 0.2% to $1,681.44 an ounce, underpinned by wariness about US default risks.
But platinum fell 0.8% to $1,665.25 an ounce after hitting a three-month high of $1,699.50 on Tuesday on supply fears. It traded at a premium to gold on Tuesday for the first time since March 2012, having hovered at a historically unusual discount to the yellow metal for much of last year.
The benchmark gold futures contract on the Tokyo Commodity Exchange hit a record high for a third consecutive session, rising to 4,828 yen a gram.
US crude was up 0.1% to $93.39 a barrel while Brent was up 0.2% to $110.52.