Asian shares fell on Thursday after a weak Spanish bond sale heightened concerns about funding difficulties for weaker eurozone countries, further undermining sentiment hurt by fading expectations of more stimulus from the U.S. Federal Reserve.

MSCI's broadest index of Asia Pacific shares outside Japan fell for a second straight session, easing as much as 1.3 per cent to a four-week low, while Japan's Nikkei average fell 0.9 per cent, also to a four-week low, after putting in its worst performance in five months a day earlier.

Shanghai shares, which resumed trading after a three-day break, gained after a private sector survey of purchasing managers showed that China's services sector expanded in March and business confidence hit an 11-month high, though overall activity remained below its long-term average.

The renewed risk aversion after a strong Asian equity performance in the first quarter comes as investors factor in less support for global economic growth, waning hopes of more monetary easing from the United States, and the potential fading of the effects of the European Central Bank's huge liquidity injections.

"More policy support from the ECB in the near-term appears unlikely, following the hawkish slant in tone during its press conference," said Barclays Capital analysts.

"Widening peripheral European government bond spreads, higher Treasuries, higher implied vol, a lower EUR and a stronger USD are reminiscent of past episodes of elevated European concern."

Risk currencies steadied, with the Australian dollar off a near three-month low of $1.0245 hit on Wednesday, and the euro holding above $1.3100 after falling nearly 1 percent the day before. Gold and oil also recovered on Thursday.

Spot gold inched up 0.3 per cent to $1,624 an ounce. U.S. crude futures rose 0.8 per cent to $102.23 a barrel while Brent crude added 0.5 per cent at $122.90 a barrel.

On Wednesday, global stocks fell over 1 per cent, gold tumbled to its lowest in nearly three months and oil shed more than 2 percent.

Asian credit markets weakened, with the spread on the iTraxx Asia ex-Japan investment-grade index widening by 5 basis points.

ASIA WARY OF INFLATION
Frances Cheung, senior strategist for Asia ex-Japan at Credit Agricole CIB in Hong Kong, said market liquidity was very thin and investors were digesting mixed signals about economic and monetary policy outlook.

"Triggered by inflation pressures, room for easing (by Asian central banks) is reduced now. Supply-side inflation is not good for the economy, so investors are more cautious," she said, but added that the current market downturn was a correction from strong performance earlier in the year.

Inflation in most Southeast Asian countries has slowed, so policymakers are likely to continue supporting growth by keeping rates steady, but they remain wary of the recent rise in oil prices.

ECB CALM ON SPAIN
Borrowing costs for Spain, the euro zone's fourth largest economy, jumped at bond auctions on Wednesday, with the 10-year bond yield leaping to 5.7 per cent, its highest since January.

It overshadowed a successful step back into debt markets by similarly highly indebted Portugal.

Ten-year Spanish yields had fallen as low as 4.6 per cent in late January as cheap ECB cash fuelled a rally in weaker peripheral state debt.

But ECB president Mario Draghi appeared relaxed about the rise in Spanish yields, after the bank kept interest rates steady as expected at a policy meeting on Wednesday.

Draghi also dismissed a German-led push for the ECB to start planning a retreat from emergency crisis-fighting.

But some financial market analysts detected a shift in the ECB's monetary policy back to a more traditional one focusing on maintaining price stability, as Draghi stressed the bank was keeping a close eye on price pressures.

Some market players said such fears may be overdone, pointing to a key gauge of how investors perceive risk, the VIX index.

The VIX, which measures expected volatility in the Standard & Poor's 500 index over the next 30 days, failed to keep its gains after rising above resistance at its 50-day moving average.

The index hit a high of 17.74 on Wednesday, its highest in nearly a month, before retreating. A fall in the index reflects easing risk aversion.

Upbeat U.S. private-sector jobs data by payrolls processor ADP on Thursday suggested the labour market was continuing to strengthen ahead of key non-farm payrolls data due on Friday, which is expected to show the U.S. economy added 203,000 jobs last month, after February's non-farm payrolls rose 227,000.