Asian shares were lackluster with the corporate reporting season getting underway in the region, as investors stayed cautious after global shares faltered overnight on weak earning reports and outlook.

The MSCI index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> shed early gains on Tuesday to ease 0.1 percent, dragged down by a 0.3 percent decline in South Korean shares <.KS11>, while a 0.1 percent gain in Australian shares helped partially offset the downward pressure.

Seoul shares slipped ahead of quarterly results from domestic blue chip stocks, starting with POSCO <005490.KS>, the world's fourth-biggest steelmaker, later in the day.

POSCO, in which Warren Buffett's Berkshire Hathaway is a shareholder, will kick off the earnings season for major Asian steelmakers. It is likely to post a third consecutive loss, dogged by weak China demand and prices.

Hong Kong markets were closed for a holiday and will resume trading on Wednesday.

"Everybody knows earnings will be weak, but if companies' guidance is more cautious than markets expect, then there is a risk that the downside may be tested," said Tetsuro Ii, CEO of Commons Assets Management.

"While excessive risk aversion has softened, there is nothing to be positive about the global growth slowdown," Ii said. But he added any dip in markets will be a buying opportunity.

U.S. stock futures were down 0.1 percent to hint at a soft Wall Street open, but European shares will likely rise, with financial spreadbetters expecting London's FTSE 100 , Paris's CAC-40 and Frankfurt's DAX to open as much as 0.3 percent higher.

U.S. stocks were weighed on Monday by heavy-equipment maker Caterpillar Inc slashing its 2012 forecast, but they eked out gains in a late-day bounce.

Japan's Nikkei average <.N225> trimmed earlier gains and was up 0.2 percent.

The share market's gains stemmed from the yen's weakening due to expectations that the Bank of Japan will opt to ease monetary conditions further when its monetary board meets to review policy on October 30.

The dollar rose to 80.02 yen, its highest since July 6. The yen weakened to a 5-1/2 month low of 104.59 yen against the euro and a 1-month low of 82.68 against the Australian dollar.

Traders have said that sentiment towards the yen has been turning around in recent weeks, and yen selling gained momentum on Monday after the dollar/yen broke key technical resistances.

"Generally speaking, expectations for a BOJ easing help push the dollar up against the yen, but the effect on the economy from easing is limited. It's more to do with recent market flows which have been pointing to a weaker yen," said Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo.

Maeba said the dollar may be capped around 80 yen in the near term but support appeared firm at 79.60-79.70 yen, and he expects the dollar to reach 82 yen by the end of the year.

On Monday, a slew of economic reports offered the latest evidence that Japan, the world's third-biggest economy, was struggling to sustain its momentum in the face of global headwinds and cooling demand and investment at home.

FED SEEN ON HOLD

Several central banks hold policy meeting this week, including the U.S. Federal Reserve, the Bank of Canada and the Reserve Bank of New Zealand. All of them are expected to keep rates on hold but may offer dovish statements, Barclays Capital said in a research note.

"We recommend staying engaged in risky assets in FX, taking advantage of the low volatility conditions being supported by central bank policy," it said.

The Fed is likely to hold off from taking fresh steps, opting to review the impact of the quantitative easing undertaken last month and keep a low profile before the November 6 U.S. election.

The euro steadied to $1.3056, drawing support from expectations of bailouts for Spain and Greece in coming weeks and also on comments by European Central Bank policymaker Joerg Asmussen, who reiterated that the bank's commitment to do everything in its power to show the euro is irreversible.

U.S. crude rose 0.2 percent to $88.83 a barrel but Brent inched down 0.1 percent to $109.33.

Asian credit markets were subdued, with the spread on the iTraxx Asia ex-Japan investment-grade index widening by 1 basis point.

(Editing by Simon Cameron-Moore)