Asian shares retreated and the euro and commodities nursed stinging losses on Thursday after fears that Europe's debt crisis is still worsening prompted investors to dump riskier assets and huddle in the safety of the dollar and Treasuries.

The market view that a European Union summit last week had failed to produce a solution to the crisis was reinforced when Italy was forced to pay an eye-watering 6.47 percent on 5-year bonds on Wednesday, a record borrowing cost for the euro era.

Japan's Nikkei fell 0.9 percent and MSCI's broadest index of Asia Pacific shares outside Japan was down 0.5 percent, following losses of around 1 percent on Wall Street and a steeper sell-off in Europe. <.T> <.N> <.EU> <.L>

Asian investors were awaiting the HSBC flash China PMI survey later, an earlier indicator of factory activity, with a weak number likely to exacerbate fears of an economic hard landing and further pressure stocks and commodities.

The MSCI Asia ex-Japan is down around 19 percent for 2011 while the Nikkei has lost about 17.5 percent, both underperforming global equities, which have lost around 12.5 percent, and U.S. stocks which are only down around 3.6 percent.

Wednesday's stock market declines were dwarfed by carnage in commodity markets, where oil, gold and copper shed 4-5 percent.

Gold has been hammered in recent days as fund managers liquidate their holdings, either to cover losses elsewhere or to lock in profits on an asset that is still up more than 10 percent for the year.

The precious metal edged up on Thursday, gaining about 0.3 percent to around $1,580 an ounce, while U.S. crude oil was almost unchanged at $95 a barrel.

The euro fell as low as $1.2944, its weakest level since January 11, and was later steady around $1.2990.

A downgrade by ratings agency Fitch of five major European financial groups, including France's Credit Agricole to A-plus from AA-negative, added to the already euro-negative sentiment.

This comes on top of the prospect of further cuts by rival Standard & Poor's, which warned earlier this month it could downgrade the ratings of 15 of the 17 euro zone members.

(Edited by Ron Popeski)