* MSCI-ex Japan a touch softer, Nikkei up 0.2 pct
* Distressed selling might have peaked, but volatility a risk
* Bonds, gold, yen nudge up in late Asian trade
By Wayne Cole and Swati Pandey
SYDNEY, Feb 7 (Reuters) - Asian shares reversed their earlier gains on Wednesday as investors dumped U.S. stock futures for safer harbours, a sign market participants remain jittery after this week's global markets rout.
While most analysts believed this week's distressed selling looks to have run its course for the moment, allowing volatility to abate a little, the prospect of monetary tightening across the globe remains a challenge for the long term.
"If we look at some of the drivers of the recent volatility – the natural correction and the bond sell-off – we don't foresee any of these factors contributing to a lengthy period of extreme volatility," said Tom Kenny, senior economist at ANZ.
"The correction is probably a healthy development and is not reflective of a souring of the macroeconomic outlook."
Investors took their cues from a late rebound on Wall Street overnight, though many had an anxious eye on E-Mini futures for the S&P 500 which slipped about 1 percent in late Asian trading. Dow Minis were down 0.9 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan was a tad softer, having risen as much as 2 percent in early trade.
Japan's Nikkei eased too but was still up 0.2 percent. Chinese blue chips and South Korea's KOSPI index dropped more than 2 percent.
Hong Kong, Singapore and Indian stock markets were also in the red.
"The only surprise about the current volatility is that it hasn't happened sooner. Normally, even in a bull market, investors should expect a sell-off of 10-percent-plus at some point," said Richard Titherington, chief investment officer of EM Asia Pacific Equities at J.P. Morgan Asset Management.
"While a major market downturn is possible, it is not our current expectation. The underlying backdrop of an improving global economy, a weakening U.S. dollar and a pickup in global earnings all remain supportive factors."
Bonds had started to see some buying again, a hint that risk appetite might be waning, which could trigger another spasm of stock selling.
U.S. 10-year yields nudged lower to 2.76 percent, after going as high as 2.80 percent earlier in the day.
It was a steep spike in yields last Friday that sparked the initial rout on Wall Street, forcing sales by a host of highly leveraged funds, which ramped up volatility and drove yet more selling.
Many of these were algorithmic funds crowded into similar trades - long stocks and short volatility. The selling then cascaded through their computer systems in a way almost beyond human intervention.
The pivotal gauge of S&P 500 volatility, the VIX, did come off almost 20 points overnight but was still relatively elevated at 29.98 percent.
"Short volatility funds were caught by the spike in the VIX and had to cover," said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
"You're a genius until you're not and when it takes just a day or two to unwind your whole strategy then you were never a genius," he added. "But volatility does cluster, so there is no guarantee that markets are out of the woods yet."
In currencies, investors found safe harbour in the Japanese yen while riskier plays such as the Australian and New Zealand dollars declined.
The U.S. dollar fell 0.3 percent to 109.23 yen, still above Tuesday's trough of 108.43.
The euro was a touch firmer at $1.2390, while the dollar was barely changed against a basket of currencies to 89.556.
Gold, another supposed safe haven, advanced 0.4 percent to $1,330.22 an ounce after touching a three-week low at $1,319.96.
Oil prices were strong too, with U.S. crude for April adding 51 cents to $63.89. Brent crude futures gained 59 cents to $67.45 a barrel.
Reporting by Wayne Cole and Swati Pandey; Editing by Shri Navaratnam and Sam Holmes