Asian shares fell for a third straight day on Wednesday as investors reduced their risk exposure due to uncertainty over global growth prospects and resurfacing worries about debt restructuring in struggling euro zone economies.

MSCI's broadest index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> fell 0.8 percent to a 10-week low while Japan's Nikkei average <.N225> dropped 1.6 percent to its lowest level in nearly two months, before ending down 0.8 percent. <.T>

European shares were likely to extend Tuesday's sharp losses that sent them to a 10-week low, with financial spreadbetters expecting Britain's FTSE 100 <.FTSE> to open as much as 0.4 percent lower, while Germany's DAX futures were down 0.5 percent and France's CAC-40 futures lost 0.6 percent.

Wall Street's benchmark Standard & Poor's 500 Index <.SPX> slid 1.7 percent on Tuesday, its worst day in four months, as selling was triggered by Friday's data showing a sharp slowdown in U.S. jobs creation last month, as well as Tuesday's data suggesting softening domestic demand as Beijing returned to an export-led trade surplus in March.

Worries about tepid global demand growth in the world's two largest economies hammered industrial commodities, with Shanghai copper plunging more than 2 percent to three-month lows on Wednesday, tracking sharp losses in London in the prior session.

The broader markets, including oil, are on risk-off mode at this point because of the series of negative numbers we have seen recently, said Natalie Robertson, an analyst at ANZ.

Some say the markets had raced ahead of themselves on optimism after recent brighter U.S. data and hopes for some progress in the euro zone debt crisis, even with Europe's sovereign debt problems set to remain a risk factor for years.

Optimism has reversed, but it's not that negativity has resumed, said Adrian Foster, head of financial markets research for Asia-Pacific at Rabobank International in Hong Kong.

He said that the jobs data was still consistent with expectations for the U.S. economy to grow 2 to 2.5 percent, although recent data had exceeded expectations.

For China, the trade data is a big indicator that business is as usual, pointing to a soft landing, Foster said. He added that bank lending data due later this week would likely confirm an underlying trend of the financial sector supporting the overall economy.

The euro inched up 0.2 percent to $1.3104, while the dollar rebounded from a five-week low of 80.60 yen.

Oil also recovered after suffering its biggest one-day percentage loss of the year on Tuesday, hitting a seven-week low on concerns about a potential slowdown in the economy of No. 2 crude consumer China.

Brent crude was up 0.2 percent to $120.14 a barrel, after settling down $2.79. Tuesday's 2.3 percent slide was the biggest one-day percentage loss since December 14. U.S. crude added 0.3 percent to $101.28, after settling at the lowest close since February 14.

Gold retreated after rising on Tuesday for a fourth straight day, its longest streak in two months, on safe-haven appeal. Bullion eased 0.4 percent to $1,653 an ounce.

RISING STRESS SIGNS

The early 2012 rally in assets that are riskier but provide the potential for higher returns has given way to choppy, two-way volatility, Standard Chartered Bank said in a research note.

For Q2, our strategy remains defensive. US data is deteriorating, Europe is in recession and China is still slowing, it said.

Asian credit markets took a hit from growing risk aversion, with the spread on the iTraxx Asia ex-Japan investment-grade index widening by 6 basis points.

Benchmark 10-year U.S. Treasury yields fell below 2 percent for the first time in more than four weeks on Tuesday, while resurfacing concerns about Europe's debt problems drove Spanish 10-year yields up to nearly 6 percent. Spanish bonds have been weighed by last week's weak debt sale.

Italian bond yields were also dragged higher ahead of a 5 billion euro bond auction on Thursday.

Rising premiums on the peripherals pushed German government bond yields lower, with the two-year yield at 0.098 percent undershooting the two-year Japanese debt yielding around 0.1 percent. German bond yields are lower than Japanese yields for the first time since January 1988, according to a Merrill Lynch report.

In another sign of rising stress in markets, the VIX index <.VIX> rose to a five-week high on Tuesday, having jumped about 31 percent so far in April. The index, a key gauge of how investors perceive risk, measures expected volatility in the S&P 500 index over the next 30 days.

(Additional reporting by Manash Goswami in Singapore; Editing by Alex Richardson)