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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."