Asian shares dropped more than 2 percent and U.S. index futures and oil also fell on Wednesday after a private survey showed China's factory sector shrank the most in 32 months and U.S. growth data was revised downwards, stoking fears about the faltering global economy.

European stocks were expected to follow suit and the euro slipped, hit by market talk based on a Belgian press report that the Franco-Belgian bailout of Dexia bank -- the first casualty of the euro zone sovereign debt crisis -- was unraveling and could undermine France's AAA credit rating.

The dollar rose broadly and U.S. Treasury 10-year note futures climbed to a seven-week high as investors scurried for the relative safety of the U.S. currency.

The steep fall in the HSBC flash purchasing managers' index (PMI) to 48 in November, a low not seen since March 2009, from 51 in October underscored Beijing's growing alarm over the health of the global economy.

Though a less-than-50 figure was expected, it suggested that China is no exception and is being hit by the euro crisis and global uncertainty, said Conita Hung, head of equity research at Delta Asia Financial Group.

The worst is yet to come. Companies involved in shipping, exports and even banking and finance will be affected.

MSCI's broadest index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> fell 2.2 percent, with the materials <.MIAPJMT00PUS> and technology <.MIAPJIT00PUS> sectors leading losses.

Spreadbetters predicted the FTSE 100 <.FTSE> would open down as much as 1.3 percent, and called Germany's DAX <.GDAXI> down 1.3 percent and France's CAC-40 <.FCHI> down 1.7 percent. <.EU>

Australia's heavyweight miners suffered a double blow, buffeted first by the lower house of parliament approving plans to impose a 30 percent tax on the iron ore and coal sectors and then by the data from China, a key source of commodities demand.

BHP Billiton fell 3.1 percent and Rio Tinto dropped 3.4 percent. The Australian dollar, also sensitive to expectations of demand for commodities, also fell around 0.6 percent.

In South Korea, tech giant Samsung Electronics <005930.KS>, a big exporter to troubled Western economies, shed 2.9 percent. Tokyo markets were closed for a holiday.

Market volumes were low, with the twin threats of a flagging U.S. economy and Europe's inexorably worsening sovereign debt crisis heightening risk aversion.

If it gets much thinner, it's going to stop, said Martin Angel, a dealer at Patersons Securities in Perth.

DOWNWARD REVISION

U.S. stocks had fallen around 0.5 percent on Tuesday, their fifth successive losing session, after data showed the economy grew at a 2 percent annual rate in the third quarter, below the initial estimate of 2.5 percent. <.N>

S&P 500 futures traded in Asia fell 1.1 percent, with losses accelerating after the HSBC flash PMI, suggesting more falls to come on the last day of Wall Street trading before the Thanksgiving holiday.

The euro fell 0.3 percent to around $1.3460, while the dollar rose a similar percentage against a basket of major currencies <.DXY> as investors sought safety.

Underlining the demand for the dollar, the yield on 10-year U.S. Treasuries fell to around 1.922 percent, from around 1.9239 late in New York.

Reaction to the Dexia report reversed earlier gains the single currency had made after the International Monetary Fund said it was beefing up its lending instruments to help shield some smaller countries from the euro zone debt crisis.

It's all about France taking a larger stake in Dexia -- if they do they run the risk of a sovereign downgrade, said a U.S.-based currency trader.

The spreading crisis -- which has pushed up risk premiums for Spanish, French, Italian and Belgian government bonds -- is making it increasingly hard for European banks to access dollar funding in the money markets.

The stresses pushed dollar LIBOR rates, the benchmark for banks lending to each other, up for the 102nd straight session on Tuesday to double the level since July.

Euro/dollar cross currency swaps, which measure the cost of swapping euros into dollars, are at the most expensive levels since 2008.

U.S. crude oil fell more than $1 a barrel to $96.74 on fears that a slowing growth will reduce demand.

Copper edged up 0.3 percent, but pared bigger gains from earlier in the session after the HSBC flash PMI.

Some commodities market players took solace from the view that the China data may prompt Beijing shift its policy focus from supporting selective parts of the economy to broader measures, such as reducing bank reserve requirements nationwide or providing fiscal stimulus.

The short-term reaction will be negative, but China will probably start monetary easing measures that will be positive for commodities in the medium term, ANZ analyst Natalie Robertson said.

(Editing by Kavita Chandran)

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