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Assets perceived as safe-haven such as gold and the yen firmed, and the euro steadied, but the growing financial strains dampened Asian credit markets.

MSCI's broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS fell 0.5 percent on Wednesday, after rising to its highest point since September 16 the day before. The index has risen 16 percent from its lows hit on October 4.

The FTSEurofirst 300 .FTEU3 index of top European shares also climbed 16 percent since hitting its lows in late September.

"Sentiment has not turned to risk-on from risk-off despite recent gains, with investors now eyeing whether Europe can actually deliver its comprehensive package," said Hirokazu Yuihama, senior strategist at Daiwa Capital Markets.

"Until investors are convinced that the sovereign debt crisis is shunned from contagion, money is unlikely to return to the markets fully. This uncertainty prompts profit taking from the recovery in stock markets which began in late September in Europe and early October in Asia," he said.

The EU summit remains scheduled for Wednesday but the gathering of finance ministers -- known as Ecofin -- was canceled because details of the meeting had not been finalized, sources told Reuters.

The leaders were expected to adopt a plan to reduce Greece's debt burden, recapitalize European banks to help absorb bond losses and strengthen the euro zone rescue fund, or the European Financial Stability Facility (EFSF), to stave off contagion in the bond market.

But there were divisions over the extent of losses that private holders of Greek bonds would have to incur and the size of a planned bank recapitalization, and the scope for leveraging the bailout fund remained uncertain.

FOCUS ON FUNDAMENTALS

The Nikkei fell 0.6 percent as the yen hit a record high against the dollar of 75.73 yen on Tuesday, fuelling concerns about its damage to corporate earnings. .T

MSCI's all-country world stock index .MIWD00000PUS fell 1.1 percent on Tuesday after earlier hitting its highest since early September on signs euro zone policymakers were close to an agreement.

The euro retreated from a six-week high of $1.3959, but the drop has been relatively shallow, with the single currency ticking up 0.1 percent to $1.3922 after finding initial support at the overnight low of $1.3847.

"Since little is now expected out of today's summit, the market impact should be limited," analysts at BNP Paribas wrote in a note. "In fact, given the recent price action and market reaction to mere speculation, a sheer commitment from policymakers may be enough to ignite a fresh risk rally. $1.4000 before the weekend remains viable."

The Australian dollar dropped half a cent as a tame consumer price data cleared the way for a cut in interest rates as early as next week. Australia has kept rates at the highest in the developed world for almost a year, as it worried about inflationary pressures amid a once-in-a-century mining boom.

The move may lend some support as Australia joins a number of countries seeing inflationary pressures falling under control, when concerns mount about a global slowdown on top of the euro zone risks.

U.S. consumer confidence unexpectedly fell to its lowest level in two-and-a-half years in October. House prices were unchanged at low levels in August, suggesting the consumer is still struggling but the economy was not headed for a recession.

On Tuesday, Hong Kong said its exports fell 3 percent in September, the first year-on-year contraction in almost two years as the impact of Europe's deepening debt crisis and a stalling U.S. economy weighed on demand for Asian exports.

"These data will raise concerns about corporate earnings. As Europe makes progress in providing a direction to solving its debt crisis, market focus will gradually shift to fundamentals and earnings forecasts," Yuihama said.

JGB, GOLD PREFFERED

Worries about slower growth and European debt woes hurting corporate earnings sapped appetite for riskier assets, as investors sought safe havens such as gold, the yen and government bonds.

Gold rose 0.8 percent to $1,715 an ounce on Wednesday. It has been moving in tandem with riskier assets, but resumed its allure as stocks and the euro fell, posting its biggest one-day rise since early September on Tuesday.

The yield on 10-year cash Japanese government bonds fell 1.5 basis points to 1.000 percent. U.S. Treasury bond prices rallied on Tuesday, with benchmark 10-year notes up 1-1/32 in price for a yield of 2.12 percent.

As strains returned, the spreads on the iTraxx Asia ex-Japan investment grade index, a gauge for whether investor risk appetite is returning, widened by seven points.

"The market has waited a long time for this summit but given the overnight headlines, one doesn't expect any resounding announcements later today so investors are happy to be sidelined," said a Hong Kong based trader at a European bank.

"But the street is lightly positioned and inflows have turned positive, so unless equities dive I don't see credit capitulating."

Some issuers have tapped the region to raise funds in recent weeks, with the latest from Fortescue Metals Group (FMG.AX), which on Wednesday said it had raised $1.5 billion of senior unsecured notes to help fund its infrastructure expansion.

The offering was upsized to $1.5 billion from $1 billion due to strong demand, Australia's No. 3 iron ore producer said.

Signs of slower growth in China and India, and developed countries as well as turbulent European markets, are prompting cash-rich Japanese retail investors to steadily diversify their emerging-markets exposure to ASEAN nations.

Japanese investors pulled out an estimated $366 million from stock funds dedicated to popular India, China and Brazil in September, but invested $624 million last month in global emerging market equity funds, or about a tenth of the total assets of such funds, data from fund tracker Lipper showed.

(Additional reporting by Ian Chua in Sydney and Umesh Desai in Hong Kong; Editing by Kavita Chandran)

Though European Union and euro zone leaders still planned to hold a summit on Wednesday, markets were spooked by news that a meeting by euro zone finance ministers was canceled.

The news fed fears that leaders will be unable to come up with the detailed plan for ending the crisis that investors want.

"There have been a number of different statements coming out that seem to suggest Europe is having a hard time coming to any real hard conclusions at solving their debt issues," said Gail Dudack, chief investment strategist at Dudack Research Group in New York.

"That alone has added a big wave of disappointment to today's market."

The S&P 500 has rallied nearly 9 percent for the month on optimism European leaders will succeed in tackling the region's debt crisis. Investors fear the impact that an uncontrolled fiscal crisis in the euro zone could have on the global economy.

On Tuesday the Dow Jones industrial average .DJI lost 205.18 points, or 1.72 percent, to 11,708.44. The Standard & Poor's 500 Index .SPX.INX fell 24.96 points, or 1.99 percent, to 1,229.23. The Nasdaq Composite Index .IXIC dropped 61.02 points, or 2.26 percent, to 2,638.42.

Adding to the pessimistic tone, 3M Co (MMM.N) reported quarterly profits that missed expectations and cut its 2011 forecast. The Dow component said the crisis in Europe was weakening consumer demand and taking a toll on profit, sending shares down 6.3 percent to $77.04.

In after-market activity, Amazon.com Inc (AMZN.O) slumped 15 percent to $193.10 after the world's largest Internet retailer reported weaker-than-expected results as it spent heavily on a new tablet computer and other long-term projects.

Other companies reporting on Tuesday included engine manufacturer Cummins Inc (CMI.N), which fell 5.1 percent to $93.81 after cutting its outlook. United Parcel Service (UPS.N) shed 2.1 percent to $69.35 after the company's chief executive said he sees the slow-growing economy continuing.

The S&P industrials index .GSPI lost 2 percent.

Netflix (NFLX.O) plunged 34.9 percent a day after the movie rental company said it lost more customers than it anticipated in the third quarter and warned of still more departures. The stock sank to $77.37.

Economic data showed U.S. consumer confidence unexpectedly dropped to its lowest level in 2 1/2 years in October, while house prices were unchanged at low levels in August, suggesting the consumer is still struggling.

Volume was light, with about 7.78 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, slightly below the daily average of 8.01 billion.

Declining stocks outnumbered advancing ones on the NYSE by 2,491 to 520, while on the Nasdaq, decliners beat advancers 2,033 to 462.

(Reporting by Chuck Mikolajczak; Editing by Kenneth Barry)

The stock tumbled 12 percent Tuesday in extended trading as the news raised concern that Amazon was losing some of the revenue momentum that had helped investors overlook its razor-thin profit margins.

Amazon forecast fourth-quarter revenue of $16.34 billion to $18.65 billion, compared with analysts' average estimate of $18.15 billion as compiled by Thomson Reuters I/B/E/S.

Amazon's forecast would mean 27 to 44 percent growth from a year earlier. In the third quarter, sales grew 44 percent, less than the 51 percent gain in the second quarter.

The company also said it could report a $200 million operating loss to a $250 million operating profit in the holiday quarter as it spends on the Fire and other initiatives.

That forecast, which includes $200 million for stock-based compensation and intangible assets, was "materially" below Wall Street expectations, according to UBS analysts Brian Pitz and Brian Fitzgerald. They were looking for $374 million in operating profit in the fourth quarter.

"We're not seeing the investment pay off yet, but I think investors are impatient as to how long will it take before you will start to see this pay off," Evercore Partners analyst Ken Sena said. "When are we going to start to see some signs?"

Amazon's fourth-quarter forecast implies a profit margin of "effectively zero," Youssef Squali, an analyst at Jefferies & Co, noted during a conference call with the company.

KINDLE FIRE COST

Amazon said on Tuesday its third-quarter net income was $63 million, or 14 cents a share, versus $231 million, or 51 cents a share, a year earlier. Revenue was $10.88 billion, up 44 percent from the third quarter of 2010, it added.

Analysts had expected earnings per share of 24 cents on revenue of $10.95 billion, according to Thomson Reuters I/B/E/S.

"Lower profit margins would be acceptable, but for the lower-than-expected revenue growth numbers," said Fred Moran, an analyst at The Benchmark Co.

Moran had expected third-quarter revenue growth of as much as 50 percent.

The company unveiled its new Kindle Fire tablet in late September and many analysts think it is being sold close to the cost of making it, or even at a loss.

"The revenue is a little light, but margin is where the biggest variance is from Wall Street's expectations," said Scot Wingo, chief executive of ChannelAdvisor, a software company that helps merchants increase online sales. "This is largely due to Amazon's investment in the Kindle Fire."

Amazon is also investing in video content and other publishing deals to support the device, while spending on datacenters for its cloud computing business and fulfillment for its online retail operations.

Wall Street has accepted such spending because Amazon has proved in the past that it can generate higher growth from such investments. However, analysts have been on edge about Amazon's third-quarter results and fourth-quarter forecasts because of the recent increase in expenditures.

SPENDING TO SUPPORT GROWTH

Amazon Chief Financial Officer Tom Szkutak said on a conference call after the results that the company has had to add fulfillment capacity to handle the growth of its main online retail business.

The company is planning to build 17 new fulfillment centers this year, two more than its previous plan, the CFO noted.

Szkutak also said Amazon is increasing production of the Kindle Fire by "a few million units," citing strong demand.

The Securities and Exchange Commission is due to vote on a final rule on Wednesday on the threshold that would trigger extensive reporting requirements for advisers to large hedge funds and other private funds.

The rule is required by last year's Dodd-Frank financial oversight law and would give the SEC for the first time a direct window into massive funds' investment concentrations and trading strategies.

The information is designed to help the new Financial Stability Oversight Council determine whether a fund's trading may pose any risks to the broader marketplace.

In addition to possibly raising the dollar threshold so that fewer advisers will be captured by the expansive reporting rules, the SEC is also planning to grant some relief for advisers to large private equity funds by only requiring them to file reports with the SEC annually, instead of quarterly as previously proposed.

The sources spoke anonymously because the final rule is not yet public and negotiations were continuing Tuesday on the details.

While advisers to large hedge funds will still be required to submit more extensive information to regulators about things such as their funds' exposures to various asset classes, the SEC's final rule will clarify that hedge fund advisers will not be forced to hand over detailed position-level data, one of the sources said.

Private funds have been nervous about handing over sensitive financial information to regulators over concerns their positions or trading strategies could be exposed. Private funds, lawmakers and some former SEC commissioners have also raised concerns about the cost of the reporting requirements.

In its original January plan, the SEC had proposed a tiered regulatory approach whereby advisers to hedge funds, liquidity funds and private equity funds with more than $1 billion in regulatory assets under management would face heightened and more detailed reporting requirements every quarter.

Under the final rule expected to emerge on Wednesday, advisers to smaller funds will still only be required to file a report with the SEC once a year with basic data such as fund strategy, leverage and credit risk.

Advisers to smaller funds will be captured by the rule as long as they are registered with the SEC and advise private funds with at least $150 million in regulatory assets under management, sources said.

Critics of the hedge fund measure had accused the SEC of failing to adequately weigh the costs and benefits of the rule, a flaw that recently caused the overturning of an SEC rule on how shareholders can nominate candidates to company boards.

"I suspect that this rule, like the one the District of Columbia Circuit recently struck down, likely results from a flawed cost-benefit analysis process," Congressman Darrell Issa wrote in a September 20 letter to the SEC. "The benefits of Form PF are too narrow and create a potential for fraud and abuse. Meanwhile the cost in terms of jobs and capital are ignored."

(Reporting by Sarah N. Lynch; Editing by Tim Dobbyn)