Markets sensitive to industrial demand, such as iron ore, were pressured by the slowdown in the Chinese economy, while the decline in dollar-based commodities and energy prices also reflected investors toning down elevated expectations for further U.S. monetary easing next month.

Data on Wednesday showing solid U.S. pending home sales while the Fed said in its Beige Book that nationwide business activity grew gradually in July and early August, pinning the Standard & Poor's 500 Index near a four-year high and the dollar in familiar levels against the yen around 78.61.

"Central banks' accommodative stance is the most significant factor for markets, so investors will be increasingly reluctant to take positions and be sensitive to swings in the dollar in the run-up to Jackson Hole," said Naohiro Niimura, a partner at Tokyo-based research and consulting firm Market Risk Advisory.

Bernanke will speak on Friday at the Jackson Hole meeting of central bankers and economists, an event he has used in the previous two years to signal the Fed's easy policy intentions.

"Receding expecations for an imminent Fed easing weighed on dollar-based commodities while concerns about weak demand from the world's largest consumer China hit commodities such as iron ore, which are driven more by fundamentals than speculators."

MSCI's broadest index of Asia-Pacific shares outside Japan shed 0.9 percent to a four-week low, pulled down by a 2 percent plunge in its materials sector. Japan's Nikkei stock average slid 0.7 percent.

Australian shares tumbled 1.2 percent to a two-week low as miners extended losses on falling iron ore prices, which hit their lowest levels since late 2009 Rio Tinto (RIO.AX) fell below A$50 a share for the first time in over three years. The ore is Australia's single biggest export earner.

The Australian dollar fell to a one-month low around $1.0320.

"We are seeing a mining industry in a state of flux," Boart Longyear Chief Executive Craig Kipp said.

"Global uncertainties ... are driving our mining customers to be more cautious with their capital," he said.

Hong Kong shares tumbled 1 percent ahead of a futures settlement at the end of Thursday trade, with the decline accelerating after stop losses were triggered at the 19,700 level when the index opened below the 200-day moving average.

Shanghai shares rebounded from their lowest close since February 2009 on Wednesday.

Despite sounding out primary dealers on potential demand for 28-day reverse repurchase agreements on Wednesday, China's central bank on Thursday opted against using the unconventional money market tool, widely seen as a compromise between short-term liquidity injections and a cut in bank reserve requirement ratios.


U.S. crude oil fell 0.5 percent to $95.05 a barrel, after slipping the previous day as Gulf Coast refineries and platforms seemed to have escaped damage from Hurricane Isaac. Brent eased 0.1 percent to $112.41.

The euro firmed 0.1 percent to $1.2537 and held steady against the yen at 98.55.

Speculation rose that the European Central Bank was moving ahead on a plan to buy bonds to lower peripheral euro zone states' borrowing costs, after ECB chief Mario Draghi wrote in an opinion piece in a German newspaper on Wednesday that the bank needed to employ "exceptional measures.

Draghi cancelled his attendance at Jackson Hole due to a heavy workload as he gears up for the bank's critical policy-setting meeting on September 6, with markets expecting the central bank to provide details of the bond-buying scheme.

Markets might remain in ranges for weeks beyond Jackson Hole and the ECB meeting, with key events lined up that could clarify the timing of any further easing by the Fed, and the roadmap for the euro zone's crisis-management.

A key U.S. jobs report is due on September 7 ahead of the Fed's September 12-13 policy meeting and the German constitutional court rules on the region's bailout funds on September 12, before euro zone finance ministers meet on September 14-15.

A report on Greece by its international lenders is due by early October to determine whether Athens will get a bailout.

The currency options market suggested players were not expecting sharp price swings, with one-month euro/dollar volatility still below 10 percent.

Later on Thursday, Italy will issue 6.5 billion euro longer-dated bonds. Italian government bond yields fell on Wednesday as dealers sensed good demand for Thursday's issuance after two successful auctions earlier this week.

Asian credit markets weakened, pushing the spread on the iTraxx Asia ex-Japan investment-grade index wider by 3 basis points.