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The political outlook remained unclear in struggling Italy and Greece as they attempt to push through severe austerity measures needed to get bail-out funds and win market confidence. Prime Minister designate Mario Monti was expected to unveil Italy's new government on Wednesday.

MSCI's broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS fell 2.1 percent, while Japan's Nikkei stock average .N225 slipped 0.9 percent on Wednesday. .T

The euro hit a five-week low against both the dollar and the yen, as euro zone jitters spurred risk aversion, and stood down 0.7 percent at $1.3437. Gold fell 1 percent to $1,763.39 an ounce as some sought to cover losses in riskier assets.

"Markets are clearly expecting a circuit breaker to alleviate pressure on periphery bond yields," said David Scutt, a trader at Arab Bank Australia in Sydney. "If no announcement is forthcoming in the days ahead, one suspects that situation could unravel fairly quickly."

European stocks were set to fall, with spreadbetters seeing London's FTSE 100 .FTSE opening down 0.6 percent, Frankfurt's DAX .GDAXI down 0.9 percent, and Paris' CAC-40 .FCHI 0.6 percent lower. .EU .L

Italian 10-year bond yields on Tuesday climbed back above 7 percent, a level of funding costs seen as unsustainable for the debt-ridden country, while Spanish 10-year bond yields rose to 6.3 percent.

The trend spread to France, where the premium over comparable German Bunds hit euro-era highs above 190 basis points. French banks are among the most exposed to Italy's 1.8 trillion euro ($2.4 trillion) public debt, holding $416 billion as of end-June, Bank for International Settlements data showed. Italian debts' premium over Bunds rose above 500 basis points.

Italy's five-year credit default swaps (CDS) -- a form of insurance against default -- scaled a new high of 600 basis points, with Italian banks and corporates the worst performers in the Markit iTraxx Europe CDS index on Tuesday.

Bearish sentiment spilled over to Asian credit markets, with risk aversion pushing the spreads on the iTraxx Asia ex-Japan investment grade index wider by 6 basis points.

ECB ROLE EYED

The uncertainty over fiscal reforms in highly indebted euro zone countries has sparked heavy selling of bonds issued by these countries, prompting financial institutions to slash their bond holdings for fear of posting huge losses as prices plunged.

Pressures for banks to beef up their capital base have only exacerbated the situation as banks' accelerated deleveraging has further eroded their appetite for government debt.

Borrowing difficulties have fueled concerns about fund raising in general, increasing strains in money markets.

Euro/dollar three-month cross currency basis swaps widened to -128.0 basis points at one point on Tuesday, the most since late 2008.

"This indicates funding issues, the market getting very nervous," said a trader for a European bank in Singapore.

With an absence of government debt buyers threatening to squeeze liquidity, "the ECB has no choice but to provide whatever liquidity the system needs and remain a very active part of the European financial market", said Adrian Foster, head of financial markets research for Asia-Pacific at Rabobank International in Hong Kong.

Many analysts say the ECB could stem this negative spiral by buying large amounts of bonds, under similar quantitative easing measures implemented by the U.S. and British central banks.

But Germany is resolutely opposed to such moves and the ECB has repeatedly rebuffed calls to become the lender of the last resort, saying it is up to individual governments to put their fiscal houses in order.

As policymakers stand at odds in determining details of the roadmap to resolve the debt crisis, EU governments have until a summit on December 9 to offer a bolder and more convincing strategy, including visible financial backing.

The sovereign debt problems have slashed euro zone growth to a mere 0.2 percent in the third quarter, raising the risk of a recession.

The United States, however, where economists expect gross domestic product growth of 1.8 percent this year, has seen recent data suggesting its economy was likely to stay clear of a recession, with October retail sales beating forecasts.

"In the current environment, a 1-1/2 to 2 percent growth would be seen as a positive support for the market," Rabobank's Foster said. ($1 = 0.739 Euros)

(Additional reporting by Ian Chua in Sydney and Masayuki Kitano in Singapore; Editing by Alex Richardson)

Uncertainties surrounding the economy and the hard drive shortage means that Dell's fiscal 2012 revenue is tracking at the lower end of its growth forecast of 1 to 5 percent, the company said.

Investors fear a slowdown in PC manufacturing through 2012 after flooding in Thailand severely disrupted production of hard drives, a key component in computers.

"To the extent that we see higher (drive) prices we'll also see some offsets in other components and we're going to do everything we can to protect our customers. But maybe in some cases we do have to raise our prices," Chief Financial Officer Brian Gladden told Reuters in an interview.

The shortage of hard drives will force Dell to prioritize toward higher-value customers and products," Gladden said.

Dell also appears to not have benefited much from the disarray at bigger rival Hewlett Packard Co, which spent much of the last quarter considering whether to spin off its PC business.

The company lost market share during the third quarter to Asian rival Lenovo Group which vaulted past it to claim the No. 2 ranking in PCs behind market leader HP.

"The PC business will remain difficult over the next year," said Brian White, analyst with Ticonderoga Securities. He cited pressure from slowing public sector spending as various government agencies around the world take austerity measures over the next year.

Dell's public business generated revenue of 4.2 billion, which was down 2 percent from the 2010 third quarter due to weakness in the United States and Western Europe.

Desktop PC revenue slid 6 percent to $3.4 billion as Dell's sales to consumers fell 6 percent over the same period.

Chief Executive Michael Dell said the company was moving away from low-margin businesses.

"We're choosing not to participate in low value opportunities which have put short-term pressure on revenue growth but have been a real driver of our expanded margins and growing earnings," Dell told analysts on a conference call.

Gross margins slipped to 23.1 percent from 23.2 percent in the prior quarter, but rose from 20 percent a year earlier.

Dell said revenue in its fiscal third quarter was essentially flat at $15.36 billion, but slightly lower than the average analyst estimate of $15.65 billion according to Thomson Reuters I/B/E/S.

Analysts on average had projected a 1.6 percent climb in Dell's fiscal 2012 revenue to almost $62.5 billion.

Net earnings rose to $893 million, or 49 cents a share, from $822 million, or 42 cents a share, in the year-ago period.

Excluding items, Dell earned 54 cents a share, better than the average analyst estimate of 47 cents.

Dell's large enterprise business increased sales 8 percent in the quarter as corporations continued to upgrade aging hardware.

Shares of Dell slid 2 percent to $15.32 in extended trade, after closing at $15.63 on Nasdaq.

Iger brings sector expertise and Disney's clout as the world's largest media and entertainment conglomerate to bear, as Apple prepares to step up a fight with the likes of Amazon.com Inc and Google Inc over content and its distribution.

Many on Wall Street also expect an attempt soon to shake up the fragmented television market, much as Apple did with iTunes and music years ago.

"Apple is going to get more into content distribution over time on the video side. That's where it makes sense for someone like Bob Iger from Disney to have that relationship with Apple," Morningstar analyst Michael Corty said.

Apple is taking the fight to Internet distribution and the so-called "cloud". It recently launched "iTunes Match", a service that for a fee of $24.99 scans the content of your music library and matches it with music available on its iTunes Store.

Google is expected to announce this week an online music service similar to iTunes.

In coming years, investors are betting that Apple will launch a full-fledged assault on TV, though skeptics say it will prove difficult to arrange distribution agreements with cable and content companies.

Jobs was himself a director at Disney, whose corporate empire encompasses TV network ABC, sports cable channel ESPN, movie studios and theme parks and resorts.

He and Iger forged a strong relationship after Disney bought Pixar -- which Jobs took over in 1986 -- for about $7.4 billion in 2006.

WHO WATCHES THE WATCHMEN?

Genentech Inc Chairman Arthur Levinson will become chairman, replacing Jobs, who died in October after a years-long struggle with cancer. Levinson had been a co-lead Apple director since 2005, alongside Avon Products Inc's Andrea Jung.

Apple had lacked a chairman until Jobs in August took the role, relinquishing his CEO duties at the same time because he could no longer fulfill them due to his worsening health. The company argued that co-lead arrangement enhanced its independence.

But analysts have said Jobs' exercised enormous influence over the board. They said his absence would trigger major changes for the board, elevating them beyond being merely advisors to a visionary leader.

The board may have to take more control, be less deferential to new CEO Tim Cook than it was to Jobs and meet more often, they said.

The naming of an independent chairman was welcomed by corporate governance experts.

"The board knows it's going to be under the microscope and Tim Cook knows that as well," said Jim Post, a professor of corporate governance at Boston University School of Management who called for an independent chairman. "The board has to move out of Steve Jobs' shadow and they have to act to like an independent board."

"The steps they have taken today move them in a better direction," he added.

Previously, some experts have raised concerns about how Jobs managed to keep his board in the dark about his health, which was a topic of constant speculation in the years before his death.

In Walter Isaacson's best-selling biography of the Silicon Valley icon, it was revealed the charismatic Jobs had sometimes lied about his condition.

Questions about the board's oversight had also arisen since Apple became one of many Silicon Valley corporations embroiled in the options-backdating scandals in the middle of the last decade.

In a fierce battle to attract and retain talent, Apple and others had resorted to backdating options -- attaching a retroactive validity date -- to make them more valuable. Apple and Jobs were eventually cleared of wrongdoing.

Apple shares were broadly unchanged at $389.12 in after hours trading. They have slid around 4 percent since the start of the month.

(Additional reporting by Lisa Richwine in Los Angeles; editing by Richard Chang and Andre Grenon)

Iger's appointment to the board of directors comes as Apple moves deeper into the media business with its iTunes store -- selling music and videos directly to consumers.

And many on Wall Street also expect an attempt to shake-up the fragmented television market.

Jobs and Iger had maintained a strong relationship after Disney bought Pixar - which Jobs took over in 1986 - for about $7.4 billion in 2006.

Genentech Inc Chairman Arthur Levinson will become chairman, replacing Jobs, who died in October after a years-long struggle with cancer. Levinson had been a co-lead Apple director since 2005, alongside Avon Products Inc's Andrea Jung.

Analysts have said Jobs absence would trigger major changes for the board, elevating them beyond being merely advisors to a visionary leader.

The board may have to take more control, be less deferential to new CEO Tim Cook than it was to Jobs and meet more often, they said.

Some have raised concerns about how Jobs managed to keep his board in the dark about his health, which was a topic of constant speculation in the years before his death.

In Walter Isaacson's best-selling biography of the Silicon Valley icon, it was revealed the charismatic Jobs had sometimes lied about his condition.

Disney's corporate empire encompasses TV network ABC, sports cable channel ESPN, movie and animation studios and theme parks and resorts.

Apple shares were broadly unchanged at $389.12 in after hours trading. They have slid around 4 percent since the start of the month.

The uncertainties surrounding the economy and the hard drive shortage due to the flooding in Thailand means that Dell's fiscal 2012 full-year revenue is tracking at the lower end of its growth forecast of 1 to 5 percent, the company said.

Severe flooding in Thailand, which produces one-quarter of the world's hard drives, has sparked a rise in prices and stranded many factories.

Analysts on average had projected a 1.6 percent climb in Dell's fiscal 2012 revenue to almost $62.5 billion.

Dell said revenue in its fiscal third quarter was essentially flat at $15.36 billion, but slightly lower than the average analyst estimate of $15.65 billion according to Thomson Reuters I/B/E/S.

Net earnings for the quarter rose to $893 million, or 49 cents a share, from $822 million, or 42 cents a share, in the year-ago period.

Excluding items, Dell earned 54 cents a share, better than the average analyst estimate of 47 cents according to Thomson Reuters I/B/E/S.

Dell's large enterprise business increased sales 8 percent on good demand for desktop PCs, servers and networking equipment as corporations continued to upgrade aging hardware. Sales to consumers fell 6 percent.

Shares of Dell slid 2 percent to $15.32 in extended trade, after closing at $15.63 on Nasdaq.

(Reporting by Poornima Gupta; Editing by Richard Chang)

Total retail sales increased 0.5 percent, the Commerce Department said on Tuesday, after rising 1.1 percent in September. That was above economists' expectations for a 0.3 percent rise.

In a separate report, the Labor Department said its producer price index fell 0.3 percent last month after rising 0.8 percent in September. Economists had expected the PPI to fall only 0.1 percent.

"The data are uniformly positive," said Eric Green, chief U.S. economist at TD Securities in New York. Retail sales "is more than enough to keep the economy going. They continue to push back the recession fears that began this summer."

The economy grew at a 2.5 percent annual pace in the third quarter, fueled in part by consumer spending.

U.S. stock index futures trimmed losses after the data, while government debt prices pared gains. The dollar held gains against the euro. In the 12 months to October, retail sales were up 7.2 percent. While October's retail sales report showed broad gains, weak income growth remains a constraint.

Consumer spending -- which accounts for more than two-thirds of U.S. economic activity -- rose at its fastest pace in nearly a year in the third quarter. But households are significantly cutting back on saving to fund their spending.

Wal-Mart Stores Inc. Chief Executive Mike Duke said the retail giant's U.S. customers were still worried about jobs and only one in 10 mothers taking part in its surveys view the economy as "good."

With food prices rising faster than most wages, some shoppers were concerned about holiday meals, the company said.

Retail sales last month rose as receipts from motor vehicle dealers increased 0.4 percent, adding to the prior month's 4.2 percent gain.

Excluding autos, retail sales rose 0.6 percent, the largest increase in seven months, after advancing 0.5 percent in September.

Sales at food and beverage stores increased 1.1 percent, while receipts at sporting goods, hobby, book and music stores gained 1.3 percent. Sales of electronics and appliances soared 3.7 percent, while receipts from building material retailers increased 1.5 percent.

But clothing store sales fell 0.7 percent last month, the largest decline since December 2010, while furniture sales declined 0.7 percent.

Receipts at gasoline stations fell 0.4 percent last month after rising 0.7 percent. The decline reflects weak gasoline prices. According to the U.S. Energy Information Administration, gasoline prices fell 4.39 percent or 16 cents to $3.506 a gallon in October.

Excluding gasoline, retail sales rose 0.7 percent.

WHOLESALE PRICES FALL

Lower gasoline and consumer goods costs depressed prices received by farms, factories and refineries last month.

Excluding volatile food and energy, core wholesale prices were flat last month after climbing 0.2 percent in September.

Weak gasoline prices, combined with subsiding inflation pressures should ease the burden on stretched household budgets and support holiday shopping.

Core retail sales, which exclude autos, gasoline and building materials, rose 0.7 percent in October after advancing 0.5 percent the prior month.

Core sales correspond most closely with the consumer spending component of the government's gross domestic product report.

A gauge of manufacturing in New York state rose in November, ending five straight months of contraction, while the outlook for coming months strengthened, the New York Federal Reserve Bank said.

The New York Fed's "Empire State" general business conditions index rose to 0.61, up from minus 8.48 the month before. Economists polled by Reuters had expected a reading of minus 2.1.

(Reporting by Lucia Mutikani and Jason Lange; Editing by Neil Stempleman)

European shares and the euro fell on Tuesday as investors renewed selling of Italian and Spanish bonds and any relief from having new leaders in Italy and Greece proved short-lived with investors seeking safe-haven assets like German bonds.

Italy's 10-year bond yield rocketed back above 7 percent, pushing its borrowing costs to a level widely seen as unsustainable and which helped trigger the fall of Silvio Berlusconi's government last week.

Global markets harbor deep concerns about whether Monti and new Greek leader Lucas Papademos, unelected European technocrats without a domestic political base, can impose the needed tough austerity and far-reaching economic reform.

A think-tank report said the situation in triple-A rated France should also be "ringing euro zone alarm bells" because of the country's inability to make rapid adjustments to its economy.

Germany and France posted solid growth in the third quarter, statistics released on Tuesday showed, but euro zone nations on the front line of the debt crisis fared much worse and analysts expect bleaker times ahead in the core economies.

"The German economy has lost its immunity," said Carsten Brzeski of ING, a Dutch bank. "With the latest stage of the sovereign debt crisis, today's numbers are as good as it gets for the German economy."

As the euro zone's largest economy and growth engine for the past two years, any hiccups in the coming business quarters in Germany would have wider effects in the region.

A rebound in household consumption lifted France's growth to a better-than-expected 0.4 percent in the third quarter, after a contraction in the second, but economists warned it was just a lull before a likely return to recession.

"You could call this the lull in the storm," said Marc Touati of Assya Compagnie Financiere. "What's worrying is that industrial investment has started going down, which proves that the virtuous circle of investment, growth and job creation is not working."

"ALARM BELLS"

The urgency of resolving the crisis was underscored by a report by the Lisbon Council, which said France's inability to make rapid adjustments to its economy was a serious worry and should be of acute concern for the euro zone.

"Among the six euro zone countries with a AAA rating, France achieves by far the lowest ranking in the study's fundamental health check," the Brussels-based think-tank found in the 75-page report, called the Euro Plus Monitor.

"The results are too mediocre for a country that wants to safeguard its place in the top league ... Alarm bells should be ringing for France.

With the survival of the 17-state currency zone in its current form now at risk, EU governments have until a summit on December 9 to come up with a bolder and more convincing strategy, involving some form of massive, visible financial backing.

Prospects are uncertain as the German government, the Bundesbank and hardliners in the European Central Bank have so far blocked key policy options.

These include issuing common euro zone bonds, mutualizing the euro zone's debt stock, letting the ECB create money to fight the crisis, or having it act as lender of last resort, directly or via the euro zone rescue fund.

The debt crisis is likely to make matters worse in the next months with nations such as Italy, Greece, Ireland, Portugal and Spain forced to adopt politically unpopular cuts to stop the bond market driving them toward default.

Economists say there is no visible growth strategy in place to counter those austerity measures.

EUROPE FACES "TOUGHEST HOUR"

German Chancellor Angela Merkel caught the mood of crisis with a stark warning on Monday that Europe could be living through its "toughest hour since World War Two." She told her CDU party she feared Europe would fail if the euro failed and vowed to do anything in her power to stop this from happening.

Monti pursued his efforts on Tuesday to secure support from feuding politicians to allow his cabinet of experts to speed up reform of pensions, labor markets and business regulation needed to put Italy's finances on a sustainable footing.

Italy has to refinance some 200 billion euros ($273 billion) of bonds by the end of April, a daunting prospect.

High borrowing costs and the release of figures showing industrial production slumped by 2 percent in the euro zone in September, raised the specter of recession and provided a gloomy backdrop to Monti's talks with the heads of smaller parties.

"Monti spoke about a significant program with many sacrifices," Francesco Nucara, a lawmaker from one of the myriad tiny parliamentary groups involved in the talks, said after meeting the prime minister-designate.

Monti, a respected former European commissioner, on Tuesday met leaders of the two largest parties of the center-right and the center-left, unions, and representatives of women and youth groups.

Expected to seek a confidence vote by Friday, Monti has said that he aimed to serve until scheduled elections in 2013, not just until reforms had been pushed through.

Far-reaching reforms are seen as crucial if Italy is to end years of stagnant growth, trim a debt mountain equal to 120 percent of gross domestic product and avoid the sort of crisis that forced bailouts of Greece, Ireland and Portugal.

GREEK DEFAULT FEARS

Papademos said late on Monday that Greece had no choice but to stay in the euro zone, telling lawmakers reforms were the only solution.

But conservatives on whom Papademos must rely for support demanded pro-growth policies and rejected any more cuts, fueling fears of a Greek default that may force Athens out of the currency group triggering a euro zone debt meltdown.

Austerity measures had deepened Greece's recession but reforms -- including widening the tax base and fighting rampant tax evasion -- could mitigate the problem, said Papademos, who oversaw Greece's entry to the euro zone in 2002.

But New Democracy leader Antonis Samaras said he would not vote for new austerity measures. Spending cuts and tax rises agreed with foreign lenders should be changed in favor of economic growth, he said.

Inspectors for Greece's international lenders, known as the troika, were due to meet Papademos's administration after the confidence vote, but an EU official said the visit might not happen until the end of the week.

Most Greeks hailed Papademos's appointment, but thousands of people angry at more than a year of austerity are expected to rally on Thursday, the anniversary of a 1973 student uprising that helped to bring down the colonels' junta of 1967-74. ($1 = 0.734 Euros)

(Additional reporting by Luke Baker in Brussels; Writing by Peter Millership; Editing by Giles Elgood)