By Lisa Twaronite
TOKYO (Reuters) - Asian shares were off session lows but still nursed losses amid a sell-off in global equities on Thursday, as heightened concerns about world economic growth pressured U.S. Treasury yields and curtailed the dollar's recent rally.
European trading was seen starting on a modestly stronger footing after the FTSEurofirst 300 (FTEU3) shed 3.2 percent to mark its biggest one-day slide in almost four years.
"Ahead of European trade, we are calling the major bourses mildly firmer with a bit of a recovery after yesterday's sharp sell-off," IG market strategist Stan Shamu wrote in a note.
MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) was down about 0.3 percent in late afternoon trade.
Shanghai shares (SSEC) bucked the downtrend and added 0.1 percent after Chinese bank lending data provided a regional bright spot. Lending beat expectations last month, a sign that demand for credit may be picking up, though a drop in China's foreign exchange reserves in the third quarter suggested ominous speculative money outflows.
Japan's Nikkei stock average (N225) tumbled 2.2 percent and touched a 4-1/2-month low, though it, too, pulled away from session lows as the dollar retook some ground lost to the yen.
The S&P 500 (SPX) briefly turned negative for the year on Wednesday, though S&P 500 e-mini futures <.ESc1> added 0.4 percent, which might portend a more stable day ahead on Wall Street as investors await more U.S. data.
September industrial output and weekly jobless claims will be released later on Thursday and could paint a brighter picture than downbeat figures released in the previous session, which came after a recent spate of weak figures from China and Europe that raised fears about the health of the global economy.
U.S. retail sales and producer prices both dropped last month, a worrisome economic signal that helped fuel a sell-off on Wall Street as it quashed expectations the U.S. Federal Reserve would raise U.S. interest rates sooner rather than later.
The New York Fed's Empire State general business conditions index also plunged to 6.17 in October from September's 27.54, marking the weakest pace of manufacturing activity in New York state since April.
The grim mood sparked a safe-haven rally in U.S. Treasuries and pushed the yield on the benchmark 10-year note (US10YT=RR) as low as 1.865 percent, its deepest nadir since May 2013. It last stood at 2.093 percent in Asian trade.
The rally carried over to the Japanese government bond market, where the yield on the 10-year JGB
Only a month ago, fed funds futures had suggested traders priced in almost a 50 percent chance of a Fed rate increase as early as June 2015. But a jump in short-term U.S. interest rate futures on Wednesday implied traders anticipate the U.S. central bank would not move away from its near zero rate stance until the end of the first quarter in 2016.
The dollar's index against a basket of six major currencies <.DXY> <=USD> stood at 85.068, down about 0.1 percent on the day and wallowing near levels last plumbed in September. Speculation of higher U.S. interest rates had pushed the index to a four-year high of 86.746 earlier this month.
Against the yen, the dollar took back some lost ground, adding about 0.3 percent on the day to 106.20 yen
"For those who were looking to buy the dollar, this was a very healthy correction," said Kaneo Ogino, director at Global-info Co in Tokyo, a foreign exchange research firm.
The dollar's sharp fall overnight lent modest support to oil prices, with U.S. crude futures
Spot gold
London copper
(Editing by Eric Meijer and Jacqueline Wong)