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Tokyo - Asian shares fell for the second straight day on Thursday as concerns about growth prospects in the world's two largest economies, the United States and China, prompted investors to trim their risk exposure ahead of the end of the quarter.
European equity markets were expected to track Asian markets lower, with financial spreadbetters predicting major European markets to open down 0.1% to 0.3%. US stock futures were steady.
Commodity-linked assets were hurt, with crude oil extending losses and dragging oil-related Chinese shares lower, while weakness in Chinese markets weighed on the Australian dollar due to worries of lower demand from Australia's single largest export market.
But a weaker Aussie lent some support to shares, making Australian equities the Asian region's relative outperformer with a 0.2% drop.
MSCI's broadest index of Asia Pacific shares outside Japan fell 0.9%, retreating from a one-week high hit earlier this week.
Still, the index is set for a quarterly gain of about 11% at current levels, the best showing since the third quarter of 2010 and the best first quarter in 21 years.
Japan's Nikkei share average slipped 0.9%, moving further away from a one-year high marked on Tuesday, but looked set for its best January-March quarter in 24 years.
The Standard & Poor's 500 Index was also on track to post its best first quarter in 14 years.
"I think China will see a temporary slowdown, which will trigger monetary and fiscal easing, and overall, the landing of Chinese economy will be soft," said Dariusz Kowalczyk, senior economist and strategist, Asia ex-Japan, at Credit Agricole CIB.
"But until evidence emerges to support such a scenario, investors will be concerned and this will cap their risk appetite, especially in the run-up to the first-quarter GDP (gross domestic product)," he said. China is scheduled to release first-quarter GDP data on April 13.
The Shanghai Composite Index fell 1% after posting its worst day since November on Wednesday with a 2.7% plunge, while Hong Kong shares shed 1.3%.
More earnings are due later on Thursday, including Bank of China, and any disappointing results could further undermine sentiment ahead of the quarter-end.
"With the Chinese stock markets under pressure, the outlook on AUD will unlikely turnaround until we see some confirmation that the Chinese economy is not weakening too much and which should be affirmed by the release of the Chinese PMI (purchasing managers' index) (on Sunday)," said analysts at BNP Paribas.
The Australian dollar fell 0.2% to $1.0370, well off a one-week high around $1.0557 reached on Tuesday. The euro edged up 0.1% at $1.3324.
Oil retreats
Data on Wednesday showed new orders for US durable goods increased only modestly in February, below analysts' forecasts, while a gauge of future business investment also fell short of expectations, raising the prospect that economic growth in the first quarter could be lacklustre.
Copper inched up 0.5% to $8 356 a tonne, recovering from a more than 2% drop on Wednesday after the durables data raised doubts about the pace of US recovery.
Oil extended the previous day's losses, after data showed US crude oil inventories posted the largest weekly build since July 2010.
Adding to the downward pressure, France said on Wednesday it was in talks with the United States and Britain on a possible release of strategic oil stocks to force down oil prices.
A recent spike in oil prices has threatened the global economic recovery and eroded corporate profits.
Brent crude, up more than 15% this quarter, eased 0.1% to $124.07 per barrel, while US crude futures also shed 0.1% to $105.30 a barrel.
Weaker equities prompted investors to sell bullion to cover losses while waiting for more clues on the health of the US economy. Spot gold was down 0.2% to $1 660 an ounce.
Europe in radar
Investors were reminded of the difficulty in resolving the eurozone's debt crisis on Wednesday when European Central Bank Governing Council member Jens Weidmann, who also heads Germany's Bundesbank, said that raising the firewall around stricken eurozone members would only buy time and end up running into financial and political constraints.
His warning preceded a meeting of European Union economic and financial affairs ministers in Copenhagen on Friday and Saturday.
"We are particularly bearish on the EUR, as we expect a re-emergence of sovereign concerns, and we also see downside for the AUD and modest weakness for CAD," Morgan Stanley said in a research note.
Asian credit markets weakened, widening the spread on the iTraxx Asia ex-Japan investment-grade index by 4 basis points.
Later in the session, German employment data and US weekly jobless claims report will be released.
