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U.S. growth is slowing and the Fed is not offering any more stimulus at this point -- even after the Bank of England stunned traders on Wednesday by saying it was considering more quantitative easing.

News that China's factory growth nearly stalled in June on weakening global demand was a further signal to investors to keep trimming assets from their portfolios that are vulnerable to volatility, and perhaps also to keep gearing at a minimum.

"The key in this environment is really just low leverage," Adrian Foster, head of financial market research at Rabobank, told Reuters Television.

"We have seen sharp moves to the upside and to the downside, and then look back and see markets have been flat for a couple of months. But if you had high leverage in that period you would have been chopped out."

The Nikkei share average .N225 fell 0.4 percent, weighed down the most by technology stocks. But foreign buying of relatively inexpensive Japanese shares and strength in blue-chip stocks such as Fast Retailing (9983.T) and Honda Motor Co (7267.T) should continue to support the Tokyo equity market.

"The Fed's view was not completely surprising, therefore the Tokyo market may not fall significantly... and Tokyo shares are still undervalued," said Tsuyoshi Kawata, a senior strategist at SMBC Nikko Securities in Tokyo.

The MSCI index of Asia Pacific stocks outside Japan .MIAPJ0000PUS fell 0.8 percent, with the consumer discretionary sector, what had been practically a sure-fire bet through most of the first half, leading the decline.

The index had fallen 7.6 percent since May as of Wednesday, underperforming the 6.8 percent decline in the MSCI all-country world stocks index .MIWD00000PUS.

Chinese stocks listed in Hong Kong were down 1.1 percent on the day .HSCE, continuing to underperform the broad Hang Seng index, after HSBC's early reading of Chinese industrial activity in June came in at an 11-month low.

CROSSES OF GOLD

Gold slipped in the spot market to $1,546.15 an ounce after four consecutive sessions of gains, but was still up 8.9 percent year to date, triple the returns of the U.S. S&P 500 index.

Furthermore, gold denominated in other currencies has been on a tear in recent weeks. Gold in sterling terms reached a record high of 969.66 pounds, gold/Australian dollar climbed to the highest in a year at AU$1,474.37.

Gold denominated in the Australian dollar could be poised for a volatile breakout to as higher as AU$1,950 in the new few months.

The euro traded around $1.4300, near the middle of a trading range carved out over the past month. The looming risk of a debt default by Greece shifted back to the forefront of investors' minds, particularly after Federal Reserve Chairman Ben Bernanke said the fate of the indebted country could threaten the global financial system.

The euro fell to a session low of $1.4293, down a touch on the day. The single currency would probably have to slide below a low for the month around $1.4070 before traders would pounce on the move.

The European Union Council meets later for a two-day meeting. Though Greece is not formally on the agenda, markets will be looking for assurances from European that they have a workable plan to help Athens avoid a debt default and return to financial stability.

The dollar rose 0.2 percent to 80.45 yen, benefiting as Tokyo dealers covered bets against the U.S. currency made in anticipation the Fed would drop hints at additional monetary easing.

U.S. oil futures fell 1.2 percent to $94.21 a barrel, supported by continued flows into the dollar. Crude prices have dropped 17 percent since May as economists ratchet down growth forecasts for the world's biggest energy consumers.

(Additional reporting by Ayai Tomisawa in Tokyo; Editing by Kim Coghill)

Fed Chairman Ben Bernanke said factors weighing on the economy, such as high commodity prices, should be fleeting but warned some of the weakness could linger.

"Part of the slowdown is temporary and part of it may be longer lasting," Bernanke told a news conference after a two-day Fed policy meeting.

The U.S. central bank kept official interest rates at a historic low near zero and Bernanke signaled they will stay there through the end of the year or longer.

The Fed estimated the economy should grow 2.7 percent to 2.9 percent this year, down from a forecast range of 3.1 to 3.3 percent made in April.

It also said it sees 2012 growth in a range of 3.3 percent to 3.7 percent, lower than its previous forecast.

In a statement, the central bank said a jump in commodity prices and supply-chain disruptions from Japan's devastating earthquake had weighed on growth and pushed up prices, but that those factors should dissipate over time.

"The Fed knows it is in for a rough road ahead," said Steve Blitz, senior economist at ITG Investment Research in New York. "At this moment the Fed is just like the rest of us, on the sidelines waiting to see what unfolds."

The Fed confirmed it was ending its $600 billion bond-buying program at the end of June and reiterated it will continue to reinvest principal payments from its holdings.

By the time its latest "quantitative easing" program wraps up next week, the Fed will have pumped some $2.3 trillion into the economy.

The Fed's downbeat economic assessment weighed on stocks, which closed lower after four days of gains. Prices for U.S. government bonds were nearly flat and the dollar edged up against the euro.

"There are no hints of further easing from the Fed," said Nick Bennenbroek, head of Group of 20 forex strategy at Wells Fargo in New York. "The statement overall disappointed investors looking for more bearish language and that's why we are seeing the dollar rally a little bit."

Bernanke, in a wide-ranging question-and-answer session with reporters which touched on issues as diverse as Greece's economic woes and the size of reserves that big banks should hold, conceded that U.S. economic hopes were partly hostage to events in Europe.

"If there were a failure to resolve that (Greek debt) situation, it would pose threats to the European financial system, the global financial system, and to European political unity," he said. "So yes, we did discuss it and it is one of several potential financial risks that we are facing now."

LONG CRAWL BACK

Two years after the end of the U.S. recession, the recovery looks disappointingly weak. Employers have been reluctant to hire and the jobless rate rose to 9.1 percent in May.

The Fed on Wednesday downgraded its view of the labor market and pushed its forecast for unemployment a bit higher.

It said the jobless rate would likely average 8.6 percent to 8.9 percent in the fourth quarter of 2011. In April, it had forecast a range of 8.4 to 8.7 percent. By 2013, the Fed said joblessness would still be significantly above what it considers to be consistent with full employment.

The Fed's inflation forecast was little changed at 2.3 percent to 2.5 percent for this year, but its projection of core prices, which strips out food and energy costs, moved up to a 1.5-to-1.8-percent range from 1.3 to 1.6 percent.

Policymakers at the Fed strive to keep inflation in a 1.7-to-2-percent range and the acceleration in core prices could complicate any desire to further support the economy.

In its statement, the Fed dropped any reference to core inflation, which it characterized in April as being "somewhat low."

With the jobs outlook uncertain and home values falling, consumer spending -- which makes up around 70 percent of U.S. GDP -- has lagged. Factory activity has been sluggish as well.

The economy grew at just a 1.8 percent annualized rate in the first three months of the year. Analysts expect growth of around 2 percent in the second quarter, still not sufficient to generate a big uptick in hiring.

The economy's weakness has led to some speculation the Fed could take fresh steps to bolster the recovery.

While Bernanke did not rule anything out, he made clear the Fed does not feel the economy is in as dire a condition as it was last fall when it launched its latest bond-buying plan.

If it were pressed into action, the Fed chief said the central bank could buy more securities, lower the interest rate it pays to banks on reserves held at the Fed or even pledge to keep its balance sheet at a high level for an extended period.

Bernanke said the vow to keep interest rates exceptionally low is intended to suggest the Fed is at least two or three meetings away from a move, but that the time period could be "significantly longer" depending on the economy.

The Fed statement and press conference led more large bond firms put off expectations of rate hikes until the second half of next year.

In a Reuters poll, only five of 19 primary dealers in Treasury securities said they expect the Fed to raise rates in the first half of 2012, down from six out of 18 in a June 3 poll. (Editing by Andrea Ricci, Tim Ahmann, Diane Craft and Gary Crosse)

It also pinned a quickening of inflation largely on temporary factors, including higher commodity prices and supply chain disruptions from Japan's devastating earthquake.

The central bank said the forces pushing up prices should dissipate, allowing inflation to subside to levels consistent with price stability, even as growth revives.

"The slower pace of recovery reflects in part factors that are likely to be temporary, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply-chain disruptions associated with the tragic events in Japan," the Fed said in a statement at the conclusion of a two-day meeting.

As widely expected, the Fed said it will maintain interest rates at exceptionally low levels for an extended period. It also confirmed it was ending its $600 billion bond-buying program at the end of the month, while reiterating that it will continue to reinvest principal payments from its holdings.

The Fed downgraded its view of the labor market, saying it had been "weaker than anticipated." That contrasted with the statement after its last meeting in April when it said the job market was "improving gradually."

U.S. stocks dipped after the Fed's statement was released, while prices for U.S. government bonds slipped and the dollar edged higher against the euro.

"The Fed statement did not offer any real surprises, but it did confirm the job situation is much weaker than was expected," said Daniel Penrod, senior industry analyst at the California Credit Union League in Ontario, California.

"The likelihood is that because of the weakness in the jobs sector, rates are going to stay low."

LONG CRAWL BACK

Two years after the end of the U.S. recession and unprecedented attempts by the Fed to boost growth, the recovery looks disappointingly weak.

While Fed officials have persistently said they expect growth to accelerate, reports since the Fed's April meeting point to a clear loss of momentum in the world's largest economy.

Employers have been reluctant to hire and the jobless rate remains stubbornly high, climbing to 9.1 percent in May. Housing -- a central component of most U.S. families' wealth -- remains mired in a deep slump.

With jobs uncertain and home values falling, consumer spending, which makes up around 70 percent of U.S. GDP, has lagged. Retail sales declined in May for the first time in 11 months.

Factory activity has been sluggish as well.

The economy grew at just a 1.8 percent annualized rate in the first three months of the year. Analysts expect growth in the second quarter to log a rate of around 2 percent, still not sufficient to generate a big uptick in hiring.

The Fed in April forecast the economy would grow between 3.1 percent and 3.3 percent in 2011 and 3.5 percent to 4.2 percent next year. It releases fresh forecasts later on Wednesday.

Even as growth has flagged, inflation has accelerated. Consumers prices posted their biggest year-on-year gain since October 2008 last month, and so-called core prices that exclude food and energy costs have also picked up.

The Fed cut interest rates to near zero in December 2008 and is on track to buy $2.3 trillion worth of longer-term securities by the end of June to stimulate economic growth. The latest buying program -- purchases of $600 billion worth of Treasuries that is dubbed QE2 because it is the second round of what economists call quantitative easing -- ends June 30.

Analysts have in recent weeks speculated the Fed may begin to consider what other tools it has to spur economic growth. Possible steps could include further asset purchases, or a bolstering of promises to markets that easy money policies will be in place until there are clear signs the recovery is taking off.

(Editing by Andrea Ricci and Tim Ahmann)

Stocks posted gains for the fourth straight day on Tuesday on growing hopes Greece would take a key step to avoiding a debt default, adding momentum to a recent rebound. The Nasdaq posted its biggest percentage gain since October, while the S&P 500 marked its best day in two months in what traders believe could be continued short-term buying from deeply oversold levels.

The Greek government survived a key vote of confidence Tuesday, enabling Athens to push ahead with tough austerity measures to avoid a default. For details, see ]

All eyes will be on the U.S. Fed's policy meeting and comments from Federal Reserve chairman Ben Bernanke at a news conference later Wednesday. A statement from the Federal Open Market Committee is due at 12:30 p.m. EDT, followed by Bernanke's press conference at 2:15 p.m. EDT.

The Fed is likely to acknowledge renewed weakness in the U.S. economy and reiterate its commitment to keeping interest rates low for an extended period. Investors will look for clues on new measures to support the economy as the Fed's second quantitative easing program comes to an end.

"Reality quickly shifts the market focus back to the global economy and its growth prospects, and the Fed meeting today will highlight that," said Peter Boockvar, equity strategist at Miller Tabak + Co in New York.

"In terms of doing more (to) boost asset prices again or doing less, also known as exit, (Bernanke) will unlikely commit to anything with the huge amount of uncertainty on the outlook."

S&P 500 futures fell 1 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration of the contract. Dow Jones industrial average futures fell 8 points, and Nasdaq 100 futures shed 3.75 points.

In earnings news, Adobe Systems Inc (ADBE.O) reported a 54 percent jump in quarterly profit on Tuesday, kept its sales growth target, and warned of weakness in European demand. Its shares fell 3.2 percent to $31.00 in premarket trade.

But FedEx Corp shares (FDX.N) rose 3 percent to $91.81 premarket after the shipping group reported quarterly results.

Net short positions by hedge funds on the S&P 500 have recently increased, according to Societe Generale's cross-asset research team. Hedge funds have also turned increasingly to shorting government bonds, especially at the long end of the curve, although overall positions remained fairly limited.

PostRock Energy Corp (PSTR.O) will buy Constellation Energy Group Inc's (CEG.N) stake in Constellation Energy Partners to consolidate the oil and gas company's operations in the Cherokee Basin of Kansas and Oklahoma.

(Reporting by Angela Moon; editing by Jeffrey Benkoe)

Greece's government won a vote of confidence late on Tuesday, a crucial step toward securing further short-term and longer-term financial aid from the European Union and the IMF as the country tries to avoid the euro zone's first sovereign debt default.

"For the next three years, we're going to see different economies work out different problems. For European economies, especially Greece, it would be through default," Mohamed El-Erian, chief executive of PIMCO, told reporters in Taipei on Wednesday via a video conference.

He didn't identify which economies other than Greece he was referring to.

El-Erian has suggested in the past that Greece would default and that Europe risks wasting money for nothing by pumping billions of dollars into the ailing economy.

"Nothing has been done to enhance growth," he said. "No single (Greek) indicator has shown strength. They are afraid a restructuring would hurt European banks."

He doubted a Greek default could trigger another global financial crisis.

"Ireland, Portugal, Italy and Spain would have to be involved. But Greece is too small in terms of economic impact," El-Erian said.

PIMCO, or the Pacific Investment Management Co, is based in California and is the world's biggest bond fund manager with nearly $1.3 trillion in assets under management.

Horacio Valeiras, chief investment officer of fund firm Allianz Global Investors Capital (AGIC), predicted that Ireland and Portugal, countries that also received financial bailouts in the wake of the global credit crisis, will have to restructure their debts.

PIMCO and AGIC are units of German insurer Allianz, which organised briefings for the media and investors.

"We are not investing in Greece, Ireland, Spain and Portugal," said Valeiras, who appeared in person at the press briefing. He said default in Greece was "inevitable".

The confidence vote in Athens came after a European ultimatum requiring the debt-choked state to agree to a five-year austerity package of measures within the next two weeks or miss out on a 12-billion euro tranche of aid money.

Without the loan, Athens will run out of cash next month and policymakers fear a default would send shockwaves through the global financial system.

European officials are also considering a second bailout package worth an estimated 120 billion euros that is meant to extend Greece's year-old 110 billion euro deal and fund it into 2014.

Sovereign debt elsewhere in the developed world has also soared since the global crisis, affecting investment decisions.

The fiscal weight of the global financial crisis prompted PIMCO to dump U.S. sovereign bonds. The fund's $236.9 billion PIMCO Total Return Fund said in March it had completed a move in February to drop all its investments in U.S. government debt.

Earlier this month, Tomoya Masanao, the head of Japan portfolio management for PIMCO, said the fund manager had cut holdings of Japanese and U.S. government debt to shift money into more attractive investments, such as debt issued by the likes of Australia, Canada, Brazil and Mexico.

(Reporting by Faith Hung; Editing by Neil Fullick)