Asian shares drifted lower and the euro idled near an 11-month low on Wednesday after the Federal Reserve failed to take any new steps to stimulate growth and offset the chilling effects of Europe's still-unresolved sovereign debt crisis.

Wall Street stocks fell after the U.S. central bank's final policy meeting of the year, at which the Fed noted modest improvement in the U.S. economy but added that market turbulence in the face of Europe's woes posed a big risk.

European stocks were expected to follow Asian shares lower, with a looming Italian bond auction keeping investors on edge, but U.S. index futures rose slightly suggesting small gains when Wall Street resumes trading later.

Investors continue to avoid risk as they look to possible sovereign debt downgrades in Europe, said Hiroichi Nishi, equity general manager at SMBC Nikko Securities in Tokyo.

Japan's Nikkei share average <.N225> and MSCI's broadest index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> both eased 0.4 percent. <.T>

Asian stocks have underperformed in the second half of the year, partly because European institutions and money managers are repatriating funds from Asia Pacific markets.

MSCI's Asia Pacific ex-Japan index is down 18 percent for the year, against a loss of around 11 percent for its All-Country World index <.MIWD00000PUS>.

Financial bookmakers predicted London's FTSE 100 <.FTSE>, Paris's CAC-40 <.FCHI> and Frankfurt's DAX <.GDAXI> would open 0.5-0.6 percent lower, while S&P 500 futures were trading up 0.3 percent. <.EU> <.L> <.N>

DOWNGRADE FEARS

Fears of mass downgrades by credit rating agencies for European sovereigns have pressured equity markets and the euro this week, pushing up the dollar -- perceived as a safer haven by investors -- and driving up borrowing costs for indebted nations such as Italy and Spain.

Nobody quite knows how bad it will get early next year, so in such uncertainty, investors are understandably looking for safety, said Linus Yip, an equity strategist with First Shanghai Securities in Hong Kong.

A key test will be an Italian bond auction later on Wednesday at which Rome is expected to pay a euro-era record cost, with an auction of Spanish debt to follow on Thursday.

The euro fell as far as $1.30090, its lowest since mid-January and nearly 20 cents below its 2011 high in May, before steadying at around $1.3030.

European leaders agreed to impose stricter budget discipline on euro zone members at a summit last week, but markets have since hardened to the view that the measures agreed to don't go far enough to resolve the two-year-old debt crisis.

That view was further cemented on Tuesday, when German Chancellor Angela Merkel rejected talk of raising the funding limit of a planned permanent bailout fund to backstop the currency bloc to above 500 billion euros (421 billion pounds).

European institutions continue to hammer the point of what they are not willing to do, said Kit Juckes, head of foreign exchange research at Societe Generale. The market is driving down the point of how little they are willing to risk in a deleveraged financial system, and this ahead of the holidays.

COMMODITIES WEAKNESS

The dollar consolidated recent gains, rising around 0.1 percent against a basket of major currencies <.DXY>.

The strength of the U.S. currency has played a part in weakness for commodities in recent days, because most are priced in dollars and therefore become more expensive for holders of other currencies when the greenback appreciates.

Copper fell for a third day, shedding 0.9 percent on the London Metal Exchange to around $7,530 a tonne. Industrial metals have also been hit by worries that renewed recession in Europe slowing economic growth elsewhere will crimp demand.

Participants are now focusing back on the European crisis, and that is prompting a broad fall across commodities, said Tetsu Emori, a fund manager with Astramax Co. in Tokyo.

U.S. crude eased a little to fall back below $100 a barrel, after rallying 2 percent in the previous session, and Brent crude was also lower, slipping 0.3 percent to just above $109 a barrel.

Oil prices are currently being pulled and pushed between fears of slackening economic growth that would tend to weaken prices and tensions between Iran and the West that have raised concerns about supply disruptions. Such disruptions would drive energy costs higher.

Gold rose 0.5 percent to about $1,640 an ounce after falling 2.5 percent on Tuesday.

Having raced to a record above $1,920 in September, partly on fears that the Federal Reserve's monetary easing steps would stoke inflation against which it has traditionally been seen as a hedge, gold has fallen back with other commodities. The precious metal remains up about 15 percent for the year.

(Additional reporting by Mari Saito in Tokyo, Ian Chua in Sydney, Clement Tan in Hong Kong and Manash Goswami in Singapore; Editing by Richard Borsuk)