By Nigel Stephenson
LONDON (Reuters) - European shares reversed early losses on Monday and the safe-haven yen fell against the dollar with no long-term economic impact seen from Friday's attack in Paris.
Asian shares hit six-week lows as investors bought into traditionally safe investments, including gold, the yen and low-risk government debt.
However, gold came off session highs, falls in bond yield moderated and the yen lost ground against the dollar.
"I don't want to say that we have got used to these things, but the markets have learnt to realise that the attacks tend to have very limited impact upon the economy and markets," Commerzbank economist Peter Dixon said.
Oil prices rose as France launched large-scale air strikes against Islamic State targets in Syria following the attacks that killed more than 130 people in the French capital.
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U.S. stock index futures turned positive, indicating Wall Street was likely to open slightly higher.
The pan-European FTSEurofirst 300 index opened lower, dragged down by travel and leisure stocks, though miners and energy stocks gained. The index was last up 0.38 percent. Paris's CAC 40 index rose 0.3 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan fell nearly 1.5 percent, its biggest daily fall since Sept. 29, and was last down 1.2 percent.
Leading the losers was Japan's Nikkei stock index which tumbled nearly 1.1 percent, nearly wiping out last week's gains as data showed the economy slipped back into recession in the July to September quarter.
It contracted at a 0.8 percent annualised rate. Economists polled by Reuters had forecast a 0.2 percent contraction.
Emerging market stocks lost nearly 1 percent.
The widely tracked CBOE volatility index or "fear gauge" hit its highest level since Oct. 2.
Chinese stocks bucked the trend, however, reversing early losses to end higher. The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 0.5 percent while the Shanghai Composite Index gained 0.7 percent.
Yields on safe-haven two-year German bonds hit a new record low of -0.382 percent and was last at -0.37 percent, flat on the day.
Ten-year German yields, the benchmark for euro zone borrowing costs, fell 0.2 basis points (bps) to 0.56 percent, moderating earlier falls after the EU statistics agency revised October inflation to 0.1 percent year-on-year from an estimated zero.
U.S. Treasury yields also fell. Ten-year yields were last down 1.6 bps at 2.26 percent, having hit 2.241 percent in Asian trade.
In currency markets, the euro initially hit a 6-1/2-month low against the safe-haven yen before recovering to trade flat at 131.886 yen.
The single currency was last down 0.4 percent at $1.0726, having hit $1.0674 last week on expectations the European Central Bank will step up quantitative easing.
"Ultimately, the Fed/ECB divergence will be the focus, with markets already pricing in a 10 basis point deposit rate cut by the ECB and extension of the QE programme," Credit Agricole FX strategist, Manuel Oliveri, said.
The dollar rose 0.1 percent against a basket of major currencies and 0.4 percent against the yen.
MIDDLE EAST
Markets in the Middle East, which trade on Sunday, were hit hard, though part of that decline was due to last week's drop in oil prices. Saudi Arabia's stock index hit a 35-month low on Sunday while stocks in Dubai and Egypt hit their lowest this year.
Crude oil rose. Benchmark Brent rose 28 cents, or half a percent, to $44.75 a barrel, having dropped 1 percent on Friday. Traders said the rise was largely a matter of sentiment, with a premium being factored in after French strikes in Syria in response.
Spot gold rose more than 1 percent to as high as $1,097.90 an ounce. It last traded at $1,091.30, having hit its lowest since February 2010 on Thursday.
(Additional reporting by Saikat Chatterjee in Hong Kong, Lisa Twaronite in Tokyo, Atul Prakash, John Geddie and Anirban Nag in London and Alexandre Boksenbaum-Granier in Paris; Editing by Louise Ireland)