Asian shares fell on Wednesday after a dip in U.S. consumer confidence revived worries about the pace of economic upturn, while the Australian dollar eased as inflation data made investors reduce their bets on an aggressive rate rise.
Conference Board's weaker-than-expected U.S. consumer confidence index for October raised concern about the U.S. earnings potential of Asian companies, driving shares lower across the region.
Japan's Nikkei index <.N225> fell 0.7 percent as a government official warned the economy must try to avoid hitting a second bottom and Japanese retail sales in September fell for a 13th month.
Shares in Honda Motor Co <7267.T>, however, surged 3.7 percent after the world's seventh-biggest carmaker surprised by nearly tripling its annual profit forecasts on Tuesday.
The Australian dollar first edged up and later gave up its gains after last quarter's inflation topped forecasts, but a steady reading of its underlying measures convinced markets the figures were not alarming enough to warrant a 50 basis point rate rise at the central bank's next meeting on November 3.
This number's just not bad enough to trigger anything other than a quarter point rate rise, said Stephen Walters, chief economist at JP Morgan in Australia.
The Australian dollar rose to as high as $0.9208 immediately after the inflation data but then climbed down to
KOREAN SHIPBUILDERS HIT
Worries about U.S. consumer confidence boosted the U.S. dollar's safe haven appeal, putting pressure on Asian currencies including the Korean won. The won hit a one-month low at 1,195.5 per dollar, brushing off news that South Korea's balance of payments surplus in September soared nearly 60 percent to a near five-year high.
The MSCI index of Asia Pacific stocks traded outside Japan <.MIAPJ0000PUS> was down 1.6 percent while the Thomson Reuters index of regional shares <.TRXFLDAXPU> was 1.1 percent lower.
Shares in Korea <.KS11> came off worst, slumping 2.2 percent as investors became nervous ahead of key earnings and economic data this week.
Shipbuilders were hurt after the Financial Times reported that leading German container shipper Peter Dohle Schiffahrts was seeking aid from the German government. That pushed shares in Hyundai Heavy Industries <009540.KS>, the world's biggest shipbuilder, down 3.9 percent.
Investor sentiment across Asia was cautious after mixed signals from Wall Street. The Dow Jones <.DJIA> edged up 0.14 percent on Tuesday as the consumer confidence data was partly offset by a housing report for August showing prices rose for a fourth straight month.
There was also some good news from Visa Inc
The oil price stabilized around $79.40 a barrel after rising overnight on industry data showing a large draw-down in U.S. crude inventories last week.
Japanese government bonds inched up with futures coming off a two-month low after strong demand for new U.S. two-year notes lifted U.S. Treasuries.
December JGB 10-year futures climbed 0.04 point to 137.90 after hitting a two-month low of 138.82 on Tuesday.
(Additional reporting by SYDNEY newsroom; editing by Tomasz Janowski)