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The artillery barrage on Tuesday, one of the most serious incidents on the divided peninsula since the end of the Korean war in 1953, boosted other safe haven assets, with gold holding most of Tuesday's gains and Japanese government bond futures gaining.

Korean bond futures rose and the won currency fell 2 percent. Market reactions to tensions with prickly North Korea tend to be short-lived, and data showed foreign investors were net buyers of South Korean stocks and bond futures.

"Korea trades at a discount to the region on a valuation basis ... If you look back at the last five years when we've had scares they were all seen as buying opportunities," said Todd Martin, Asia equity strategist with Societe Generale.

"The rule among hedge funds and long-only funds is that you let the market sell off and watch for your entry point to get involved."

The euro and global equities markets had already been under pressure as investors feared a rescue package for Ireland may not stop a debt crisis from spreading to other euro zone countries.

Tokyo's Nikkei .N225, which did not trade because of a holiday on Tuesday, fell 1.5 percent and the benchmark index in South Korea .KS11, where the trading day was ending when news of the North Korean attack broke, fell 1.2 percent.

MSCI's index of Asia Pacific shares outside Japan .MIAPJ0000PUS fell 0.4 percent. U.S. share markets had fallen on Tuesday, with the S&P 500 index .SPX dropping 1.4 percent.

The euro, which had tumbled 1.9 percent overnight, steadied a little to trade around $1.34. The dollar surged to 1,170 won from around 1,125 on Tuesday, and was later changing hands around 1,153.

Benchmark Japanese government bond futures rose 0.24 point and the 10-year yield edged down 1 basis point.

Spot gold edged down 0.2 percent to $1,372.95 an ounce, after touching a 1- week high of $1,382 in the previous session, and U.S. crude oil futures rose 15 cents to $81.40 a barrel.

(Editing by Kim Coghill)

It is the latest in a string of private equity-backed portfolio companies to move to go public, such as Carlyle-backed government consulting firm Booz Allen Hamilton (BAH.N).

The window for private equity IPO exits was shut during the financial crisis but cracked open late last year. Private equity firms have a large number of companies to sell in coming years as they look to profit from buyouts done during the boom years of the last decade.

However, some have run into problems; such as Harrah's Entertainment Inc, which pulled a planned $500 million offering on Friday, citing difficult market conditions.

Some potential private equity-backed IPOs which have already filed, such as retailer Toys R Us Inc, may sit it out until next year.

Investors historically have been more critical of private equity-backed companies, which typically have higher debt.

Kinder Morgan, backed by Carlyle Group CYL.UL and Goldman Sachs Group Inc's (GS.N) buyout fund, said all of the common stock in the offering will be sold by existing investors, including Carlyle, Goldman, Highstar Capital and Riverstone Holdings.

Kinder Morgan said it would not receive any proceeds from the offering.

Goldman Sachs and Barclays Capital (BARC.L) are joint book-running managers for the offering.

Reuters reported in July that the pipeline company was preparing for the offering, citing a source familiar with the matter.

(Reporting by Michael Erman and Megan Davies; Editing by Lisa Von Ahn, Bernard Orr)

South Korea warned of retaliation if North Korea took more aggressive steps after Pyongyang fired artillery shells at a South Korean island, in one of the heaviest attacks in the area since the Korean War ended in 1953. The iShares MSCI South Korea Index Fund (EWY.P) fell 5.4 percent.

The unexpected flare-up increased investor anxiety. The CBOE Volatility Index .VIX, Wall Street's fear gauge, rose 12.3 percent, its largest daily percentage gain in more than three months.

Jeff Kleintop, chief market strategist at LPL Financial in Boston, said the news reminded traders how easily markets can be disturbed by geopolitics.

"As we move into 2011, (U.S. President Barack) Obama is going to be a lot less focused on domestic policy -- where we have gridlock -- and more focused on foreign policy, and confronting some of these regimes. That might mean higher geopolitical risk premiums going forward," Kleintop said.

Ireland's unsteady situation hurt the euro, which also had contributed to the slump in stocks. The equity market's tight link to the euro has broken of late but resurfaces in times of turmoil. Investors remain concerned about a widening debt crisis on the continent.

The European Union urged Ireland to adopt an austerity budget on time to unlock promised EU/IMF funding, while Irish Prime Minister Brian Cowen rebuffed calls for a snap election and insisted the budget would go ahead as planned on December 7.

An index of U.S.-traded shares of Irish companies .BKIE fell 4.9 percent.

"Now we have sovereigns in trouble being bailed out by essentially super-sovereigns," U.S. economist Nouriel Roubini told Reuters Insider. "But there's not going to be anybody coming from Mars or the moon to bail out the IMF or the euro zone."

The Dow Jones industrial average .DJI lost 142.21 points, or 1.27 percent, to 11,036.37. The Standard & Poor's 500 .SPX fell 17.11 points, or 1.43 percent, to 1,180.73. The Nasdaq Composite .IXIC dropped 37.07 points, or 1.46 percent, to 2,494.95.

Declining stocks far outnumbered advancing ones on the NYSE by a ratio of about 7 to 2, while on the Nasdaq, three stocks fell for every share that rose.

The energy sector .GSPE of the S&P 500 led declines, down 1.9 percent as U.S. oil futures prices fell 0.6 percent to settle at $81.25 a barrel.

Oil giants Chevron (CVX.N) and Exxon Mobil (XOM.N), each down about 2 percent, accounted for 15.5 percent of the drop in the Dow industrials.

The S&P 500 has found strong support around the 1,175 area. The 23.6 percent retracement of the index's 2010 low-to-high gain, last week's low and its 50-day moving average all coincide near that level.

Market reaction was muted to minutes from the Federal Reserve's policy-making panel that showed the FOMC considered even more drastic options to stimulate the economy before it settled on buying $600 billion in bonds in a second round of quantitative easing.

Fed officials sharply revised down their forecasts for economic growth next year, and saw unemployment at significantly higher levels than they had the last time they issued official forecasts in June. <FED/FCASTS>

Most participants in the Federal Open Market Committee, the Fed's policy-setting arm, backed the plan to ramp up asset purchases in an effort to bring down long-term interest rates and try to nudge economic activity up a notch.

In a rare, unscheduled meeting held via videoconference on October 15, policymakers debated a range of new avenues for policy, including the possibility of targeting a specific level of bond yields and enhancing communications by instituting news briefings by Chairman Ben Bernanke.

The U.S. economy grew 2.5 percent in the third quarter, the Commerce Department reported on Tuesday, a bit faster than a previous estimate of 2 percent, but still not quick enough to put a dent in the nation's 9.6 percent unemployment rate.

Against that backdrop, the Fed minutes depicted the November policy move as in part an insurance policy against the threat of further disinflation -- and potentially even a corrosive bout of deflation.

Still, not all Fed officials believed the new policy, which has raised controversy both at home and abroad, would help lift the economy out of its doldrums. In fact, "several" participants believed a further increase in Fed credit to the banking system, already around $2.3 trillion following an array of emergency measures undertaken during the financial crisis, risked future inflation.

One particular passage in the minutes nicely captured the internal divisions that could make it more difficult for the committee to extend its easing policies if it decides to do so. Its current bond-buying program is set to expire at the end of June.

"A few participants expected that continuing resource slack would lead to some further disinflation in coming years," the minutes said. "However, a few others thought that the exceptionally accommodative stance of monetary policy, coupled with rising prices of energy and other commodities ... made it more likely that inflation would increase."

Gross domestic product growth was revised up to an annualized rate of 2.5 percent from 2.0 percent as exports, and consumer and government spending were stronger than initially thought, the Commerce Department said in its second estimate.

Economists had expected GDP growth, which measures total goods and services output within U.S. borders, to be revised up to a 2.4 percent pace. The economy expanded at a 1.7 percent rate in the second quarter.

There are signs activity picked up mildly as the fourth quarter started, but growth will likely remain below the 3.5 percent rate that economists say is needed to reduce a 9.6 percent unemployment rate.

Concerns about the slow growth pace spurred the Federal Reserve early this month to ease monetary policy further through controversial purchases of $600 billion worth of government bonds to drive ultra low interest rates even lower.

The U.S. central bank is expected to cut growth forecasts for this year through 2012 when it releases minutes of the November 2-3 meeting later on Tuesday.

The government revised third-quarter growth to reflect sturdy consumer , government and business spending. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew at a 2.8 percent rate in the July-September period instead of 2.6 percent.

It was still the fastest pace since the fourth quarter of 2006 and was an acceleration from the second quarter's 2.2 percent pace. Government spending increased at a 4.0 percent rate rather than 3.4 percent, due to an upward revision in state and local expenditures.

Business investment was a touch higher than initially estimated, lifted by much stronger spending on equipment and software, though structures were weak. Business spending increased at a 10.3 percent rate instead of 9.7 percent.

That was still a step down from the second quarter's brisk 17.2 percent rate. Spending on software and equipment grew at a 16.8 percent rate instead of 12.0 percent.

The contribution from business inventories was surprisingly smaller than initially estimated, the report showed. Business inventories increased $111.5 billion, instead of $115.5 billion in last month's estimate, adding 1.30 percentage points to third-quarter GDP.

Excluding inventories, the economy expanded at a 1.2 percent pace rather than 0.6 percent.

Revisions to third-quarter GDP growth also reflected import growth that was not as big as initially thought, while exports were a bit stronger. That created a trade deficit that sliced off 1.76 percentage points from GDP growth instead of 2.01 percentage points.

Investment in home building was a drag on growth, contracting at a 27.5 percent rate, a touch less than the 29.1 percent decline reported last month.

The GDP report also showed after tax corporate profits rose 1.0 percent in the third quarter after growing 3.9 percent in the April-June period. The increase in third-quarter profits was below economists' expectations for 3.6 percent.

The report also showed no inflation pressures in the economy. The Fed's preferred inflation measure, the personal consumption expenditures price index, excluding food and energy, rose at an unrevised annual rate of 0.8 percent.

That was the smallest increase since the fourth quarter of 2008 and the second-lowest reading since the fourth quarter of 1962.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Hormel also forecast fiscal 2011 earnings above Wall Street estimates, despite expected pressure from higher raw material costs, higher commodity grain costs and difficult comparisons.

Profit improvements in Hormel's refrigerated foods and Jennie-O Turkey segment were driven by strong pork operating margins and cost cuts and helped offset declines in the grocery products and specialty foods segment, which were hurt by higher raw material costs.

Hormel, which makes Spam canned meat and Dinty Moore stew, reported quarterly profit of 90 cents per share, compared to 77 cents per share a year earlier and analysts' average estimate of 79 cents per share.

Campbell, the world's biggest soup maker, reported lower quarterly profit, as deep discounts on soup failed spur sales as expected.

Campbell warned earlier this month that the results for its fiscal first quarter were weaker than it expected and cut its forecast for the year, sending shares down nearly 4 percent.

The company said net income fell to $279 million, or 82 cents per share, in its fiscal first quarter, ended on October 31, from $304 million, or 87 cents per share, a year earlier.

Analysts on average were expecting 83 cents per share, according to Thomson Reuters I/B/E/S.

Sales slipped 1.4 percent to $2.17 billion.

Campbell expects fiscal 2011 earnings-per-share growth of 2 percent to 4 percent and net sales growth of 1 percent to 3 percent, including an estimated 1 percentage point benefit from currency exchange rates.

Hormel said it expects fiscal 2011 earnings per share of $3.10 to $3.20 per share. Analysts on average had been expecting $3.05 per share.

The company announced a 21-percent dividend increase on Monday.

(Reporting by Martinne Geller; Additional reporting by Jon Lentz, editing by Dave Zimmerman)

* At 4:46 a.m. ET, futures for the S&P 500 were down 0.7 percent, Dow Jones futures down 0.5 percent and Nasdaq 100 futures were down 0.6 percent.

* North Korea fired dozens of artillery shells at a South Korean island on Tuesday, in one of the heaviest bombardments on the South since the Korean War ended in 1953.

* South Korean President Lee Myung-bak, who has pursued a hard line with the reclusive North since taking office nearly three years ago, said a response had to be firm following the attack on Yeonpyeong island, just 120 km (75 miles) west of the capital Seoul.

* The dollar rose on the news, adding geopolitical tension to Europe's debt crisis and driving investors to the relative safety of the U.S. currency.

* Ireland begins two nervous weeks of political maneuvering on Tuesday as the government dares the opposition to block an austerity budget on which a multi-billion euro EU/IMF bailout is riding. Irish Prime Minister Brian Cowen defied mounting pressure to quit on Monday, saying he would stay in office until parliament passed the budget, then call an early election.

* The cost of insuring Irish and Portuguese government debt against default rose on Tuesday as markets fretted over the impact of political uncertainty in Ireland on budget plans, while the premium that investors demand to hold Irish and other peripheral euro zone government bonds rather than German debt also gained ground.

* European stocks hit a 3-week low, as banking stocks such as Barclays (BARC.L) and Credit Agricole (CAGR.PA) took another beating. The sector index .SX7P has lost 13 percent since mid-September.

* On the earnings front, Hewlett-Packard Co (HPQ.N) will be in focus after it raised fiscal 2011 results forecasts and a solid debut by new CEO Leo Apotheker calmed investors nervous about his vision, sending the technology company's shares traded in Frankfurt (HPQ.F) up 4.4 percent.

* On the macro front, investors will keep an eye on the second estimate of third-quarter U.S. GDP as well as on the publication of the minutes of the Federal Reserve's November 3 Open Market Committee meeting, when it opted for more quantitative easing.

* Bank shares weighed on Wall Street on Monday as Europe's smoldering debt crisis and fears of an insider trading probe in the United States sapped buying interest for most of the session.

* The Dow Jones industrial average .DJI fell 24.97 points, or 0.22 percent, to 11,178.58. The Standard & Poor's 500 Index .SPX dipped 1.89 points, or 0.16 percent, to 1,197.84. But the Nasdaq Composite Index .IXIC gained 13.90 points, or 0.55 percent, to 2,532.02.

(Reporting by Blaise Robinson; Editing by Jon Loades-Carter)

Barring any last-minute snags in the talks, an agreement could be announced as early as Tuesday when the retailer is expected to report its quarterly results, said the sources, who declined to be named because the talks were not public.

The deal would include a so-called "go shop" window that would allow J Crew to solicit superior offers, sources said. The go-shop period would last through the holidays, sources said, allowing potential suitors to see how the retailer performs through the crucial holiday shopping period.

J Crew, which sells upscale apparel for men and women, has a market capitalization of around $2.3 billion. An offer of $43.50 per share would mark a premium of just over 15 percent compared with Monday's closing share price of $37.65. J Crew's stock has fallen about 19 percent so far this year.

Under the terms of the deal, TPG would own 75 percent of the company and Leonard Green would own the remaining 25 percent, one source said. J Crew's Chairman and Chief Executive, Millard Drexler would also participate in the deal, one source said.

TPG had been a former owner of J Crew, buying an 88 percent stake for about $500 million in 1997. J Crew went public in 2006.

J Crew could not be immediately reached for comment. TPG declined to comment. Leonard Green could not be immediately reached for comment.

In August, J Crew gave lower-than-expected earnings forecasts for the third quarter and full-year 2010, citing "nervous" shoppers and promotions by competitors.

"The continued economic uncertainty that we're all seeing is leading us to take a more conservative outlook for the back half of the year," Chief Executive Millard Drexler said at the time.

The retailer, which sells upscale women's and men's apparel, accessories and shoes, operated 246 retail stores, the J Crew catalog business, jcrew.com and 81 factory outlet stores as of mid-year.

The New York Times' DealBook first reported the talks.

(Editing by Dhara Ranasinghe)