Asia shares slump, yen benefits as safer haven

European stock index futures pointed to a lower open, adding to the previous session's sell-off and mirroring the sharp drop on Wall Street.

Asian investors were unnerved by a surprise drop in U.S. home sales last month, which followed a decline in consumer confidence, highlighting risks to a recovery in the world's biggest economy.

The MSCI index of Asia Pacific stocks traded outside Japan <.MIAPJ0000PUS> slid 2.4 percent while the Thomson Reuters index of regional shares <.TRXFLDAXPU> was down 1.4 percent, marking a third session of losses.

"Everybody's been calling for a correction but I think the speed and volume of what we're seeing has caught the market by surprise," said Ben Potter, a research analyst at IG Markets in Australia, where shares tumbled 2.4 percent.

"There has been a big change in underlying sentiment which has triggered faint alarm bells."

High-yielding Australian and New Zealand currencies fell to three-week lows and Indonesia's central bank was seen in the market for a second day to support the rupiah.

Currency traders said hedge funds, whose flight from risky assets had aggravated a sell-off in Latin American markets on Wednesday, were seen taking profits on Asian investments ahead of their business year-end in November.

Short-term speculators were also pocketing gains. However, losses were restrained compared with Wednesday's 5 percent slump in the MSCI's Latin American stock index <.MILA00000PUS>.

The New Zealand dollar came under additional pressure after the central bank vowed to maintain record-low rates until at least July 2010. The Australian dollar -- which has climbed about 40 percent against the dollar since March -- hit $0.8942 at one point, its lowest point in three weeks, while the rupiah hit a one-month low at 9,700 to the dollar. It is still Asia's best performing currency this year, up 13 percent.

ANZ CAUTIOUS

The yen's strength added pressure on shares of exporters in Japan, driving the Nikkei index <.N225> down 1.8 percent and below the 10,000 points mark for the first time in three weeks.

The yen rose to as high as 90.25 to the dollar from 90.78 on Wednesday, when it gained more than 1 percent, while the dollar was steady against a basket of currencies <.DXY> near its highest in more than two weeks.

Foreign investors were pulling out of South Korea's stock market, which saw the biggest net selling by foreigners this year as the benchmark KOSPI index <.KS11> fell 1.5 percent.

Asian stocks have been among the strongest performers this year though and each pullback has been taken as buying opportunity to play the Asia growth story.

Disappointing U.S. home sales data on Wednesday overshadowed news that U.S. durable goods orders rose for the second time in three months and raised fears that U.S. third-quarter gross domestic product, due out later on Thursday, would fall short of forecasts for 3.3 percent annualized growth.

Receding rate rise expectations in New Zealand heaped pressure on the Kiwi dollar, which fell as far as $0.7163, its lowest level in more than three weeks, after the central bank kept interest rates on hold and said it expected them to remain at a record low until July at least.

While Norway followed Australia and raised interest rates on Wednesday as its economy recovers from the global downturn, New Zealand central bank governor Alan Bollard was notably cautious about the global outlook on Thursday.

"There remain significant vulnerabilities and challenges to be worked through in many economies," Bollard said in a statement. "This process could weigh on global growth going forward."

Australian banks have also been surprisingly cautious this week, despite being far less affected by the crisis than their U.S. and European peers.