Riskier assets retreated broadly on Wednesday as hopes for fresh measures to tackle the euro zone debt crisis faded and caution set in ahead of a meeting of European leaders, with sentiment hurt by renewed fears Greece would leave the euro bloc.
European shares also looked likely to slump, with financial spreadbetters predicting major European markets would open as much as 1.5% lower. US stock futures were down 0.5%.
Shares, commodities, commodity-linked currencies and the euro all slid, while safe-haven demand lifted the dollar index measured against major currencies up to 81.830, its highest since September 2010.
MSCI's broadest index of Asia-Pacific shares outside Japan slumped 2.0%. It had risen 1.1% for its biggest daily gain in almost two months on Tuesday on hopes that European leaders might find ways to breathe life into their stricken economies, as well as reports that China is planning measures to combat its slowdown.
Tuesday's outperformers - technology and materials sectors - lagged. Tech-heavy Korean equities fell 1.3%, dragged lower after Samsung Electronics Co Ltd slumped more than 3%. A weak second-quarter outlook from Dell Inc , which pushed its shares down 11% in after-hours trading on Tuesday, didn't help the tech sector.
With the euro a breath away from a four-month low, and also within sight of a 21-month low, gold extended sharp losses made in the previous session.
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Investors were watching whether European leaders can come up with fresh measures to contain the euro zone's debt crisis as the problem escalates from concerns about a Greek exit to Spain's banking instability.
European Union leaders are expected to discuss later on Wednesday the idea of regional bonds jointly underwritten by all euro zone member states. New French President Francois Hollande supports the proposal but German Chancellor Angela Merkel is opposed to it.
"Can it solve the debt crisis? No," said Dick Poon, manager of precious metals at Heraeus in Hong Kong.
"Everyone is worried about Greece withdrawing from the euro zone and the global economy, and would rather keep cash on hand than buy anything."
Barclays Capital analysts said in a research note they doubted the EU summit would result in concrete agreements, and market confidence was unlikely to return until developments in Greece, and Europe in general, become clearer.
The Aussie dollar touched a six-month low around $0.9742 as investors dumped riskier, higher-yielding assets over fears of a Greek exit from the euro.
The euro fell to as low as $1.2643, barely above last week's trough of $1.2642 and its 2012 low of $1.2624 set in January. A drop below the latter level would take the euro to its lowest since August 2010. The euro last stood at $1.2672.
Greece's bank stability fund approved an 18 billion euro injection to recapitalise its four largest banks on Tuesday, allowing them to tap funding again from the European Central Bank. The ECB cut off some Greek banks last week because they lacked enough capital to be considered solvent.
Japan's Nikkei stock average fell 1.7%.
The Bank of Japan kept monetary policy unchanged on Wednesday, as widely expected, saving its increasingly limited ammunition in case European and global conditions become worse.
The yen ticked up slightly to around 79.67 yen from around 79.81 yen just before the BoJ's policy announcement, reflecting disappointment from some speculators betting on an outside chance of a further easing, traders said.