Asian stocks slid on Wednesday and European markets were expected to follow suit as poor U.S. home sales added to fears about the global economic recovery and optimism over China's new flexible yuan policy faded.

Lorraine Tan, director of Asia equity research at S&P in Singapore, said many investors were sidelined, worried about a double dip in the global economy. Poor economic data was a reminder that any recovery is going to be slow.

At this stage, I don't think there will be a double dip, but this sluggish growth will last, with little bumps along the way, she said.

Japan's Nikkei share average <.N225> closed down nearly 2 percent, sliding to a one-week low and back toward a key support level, while the MSCI index of Asia Pacific ex-Japan stocks <.MIAPJ0000PUS> was down over 1.3 percent as investors sold riskier assets.

Shares of resource firms and banks led the declines on concerns that global demand could be sputtering, weighing on commodities prices, but gold miners such as Australia's Newcrest Mining rose 0.8 percent as investors looked for safe havens from the selling in other markets.

European shares were expected to track Asia and fall for a second day on Wednesday, with Britain's FTSE <.FTSE> seen down 1 percent, Germany's DAX <.GDAXI> falling 0.8 percent, and the French CAC 40 <.FCHI> slipping 1.1 percent.

The European benchmark FTSEurofirst 300 <.FTEU3> index is up more than 62 percent from its lifetime low of March 9, 2009, as major economies return to growth. But it is only up 0.5 percent for 2010, having stumbled in April and May when worries about debt levels in Europe escalated.

U.S. stock futures rose 0.16 percent.

U.S. stock indexes fell as much as 1.6 percent on Tuesday, hit by the poor housing data and the S&P 500 <.SPX> moving below its 200 day-moving average, which has been seen as a key technical support level for the markets' recent rally. <.N>


Sales of U.S. existing homes unexpectedly fell in May, sparking worries that the Federal Open Market Committee may offer a less upbeat economic outlook after a two-day meeting ends on Wednesday.

The Federal Reserve, in a statement due at 1815 GMT, is widely expected to hold rates near zero and reiterate its commitment to keeping interest rates exceptionally low for an extended period.

The dollar <.DXY> and the yen edged higher while the euro and high-yielding currencies like the Australian dollar were on the defensive as a recent risk rally appeared to have run its course and the euphoria from China's new yuan policy waned. The euro was trading around 1.2264 to the dollar.

Global markets jumped on Monday as China's announcement of currency reforms raised hopes that a stronger yuan would lift its purchases of foreign goods and boost the global economy, but the realization soon set in that any appreciation would be slow.

Beijing allowed the yuan to gain nearly 0.5 percent against the dollar on Monday, but selling by big state-owned banks kept it in check on Tuesday.

China's central bank set the yuan's daily mid-point at 6.8102 against the dollar on Wednesday, slightly stronger than Tuesday's spot market close but below Tuesday's mid-point setting.

Energy shares <.GSPE> were also hit as oil prices fell on higher U.S. inventories, and after the Obama administration said it would appeal a court decision which overturned its moratorium on deepwater drilling in the wake of the Gulf of Mexico spill.

U.S. crude for August delivery slid 30 cents to $77.55 a barrel. Spot gold rose slightly to $1,239.70 an ounce as investors sought a safe haven.