Asia stocks edgy on geopolitical woes, Europe set to falter

TOKYO (Reuters) - U.S. air strikes in Syria left Asian stock markets jaded on Wednesday, setting the stage for another soft session for European shares.

The dollar was kept in check after U.S. yields fell on geopolitical concerns and dovish statements by a Federal Reserve official.

Spreadbetters saw European equities starting lower, forecasting London's FTSE <.FTSE> to open down as much as 0.3 percent, Germany's DAX <.GDAXI> and France's CAX <.FCHI> down 0.2 percent each.

MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> initially fell to a four-month low after Wall Street's overnight slide, but managed to steady thanks to gains in Chinese shares.

The CSI300 <.CSI300> of the leading Shanghai and Shenzhen A-share listings climbed 0.9 percent, while the Shanghai Composite Index <.SSEC> was up 0.8 percent.

Space and defense stocks surged, with the industries enjoying support on hopes they would benefit from deepening reforms in state firms and from more government investment in defence.

On the other hand, Tokyo's Nikkei <.N225> shed 0.3 percent and Australian shares <.AXJO> lost 1.1 percent.

The United States and its Arab allies bombed militant groups in Syria for the first time on Tuesday, opening a new front amid shifting Middle East alliances and sapping demand for risk.

"If geopolitical concerns deepen, you can't expect Japanese markets alone to survive. The market could fall up to 10-15 percent at most," said Akiko Miyazaki, director of stocks at Barclays in Tokyo.

The air strikes in Syria also garnered demand for safe-haven government debt and pushed U.S. Treasury yields lower, in turn helping arrest the dollar's recent bull run.

The dollar was down 0.3 percent at 108.58 yen , after going as low as 108.25 yen overnight.

The greenback has been on the back foot after scaling a six-year high of 109.46 on Friday, receiving an additional knock after Japanese Prime Minister Shinzo Abe voiced concern about the economic impact from the currency's recent weakness.

The euro was little changed at $1.2851 , limping away from the 14-month low of $1.2816 hit Monday.

Fed officials could offer more catalysts for currency markets, after Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said on Tuesday the central bank can keep stimulating the U.S. economy because inflation is posing little threat - comments the markets perceived as dovish.

Federal Reserve Bank of Cleveland President Loretta Mester speaks later in the day.

"Fed officials will be in focus again today.. .if they do not give any hints that they are in a hurry to hike rates the dollar could lose more ground against the yen and present 109 as a ceiling," said Masafumi Yamamoto, market strategist for Praevidentia Strategy in Tokyo.

In commodities, Brent crude oil slid, with ample global supplies outweighing tensions in the Middle East for the moment. [O/R]

Brent was down 12 cents at $96.73 a barrel.

Gold clung to overnight gains on Wednesday as Asian shares retreated, but investors remained cautious amid a firmer dollar and upbeat U.S. manufacturing data that kept prices near their lowest since January. [GOL/]

Spot gold held steady at $1,223.40 an ounce.

Copper was stuck near three-year lows, weighed after miner Newmont raised its supply forecast and by signs of fragility in the global economy. [MET/L]

Three-month copper on the London Metal Exchange inched up 0.1 percent to $6,725.00 a tonne after slumping to the lowest in three months on Monday at $6,707.25 a tonne.

(Additional reporting by Hideyuki Sano in Tokyo and Grace Li in Hong Kong; Editing by Eric Meijer & Shri Navaratnam)

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