Asian stocks moved cautiously Wednesday following losses on Wall Street and in Europe, while Tokyo dropped sharply as the yen strengthened on news of a delayed tax rise.
Traders were generally wary even though official data showed activity in Chinese factories expanded in May for the third straight month.
Global equity markets pulled back overnight as investors awaited a May US jobs report and the outcome of a European Central Bank meeting.
Investors also weighed a batch of mostly encouraging US data for further hints of when to expect an interest rate rise, after Fed Chair Janet Yellen said last week an increase could be justified "in the coming months".
In Asia, Sydney ended more than one percent lower despite data showing stronger than predicted GDP expansion of 1.1 percent in the first quarter, driven by exports and household spending.
Energy and mining stocks took a hit as oil prices fell ahead of an OPEC meeting in Vienna Thursday, with Rio Tinto and BHP Billiton dipping two and 3.1 percent respectively.
In oil markets US benchmark West Texas Intermediate (WTI) for delivery in July was down 46 cents at $48.64 a barrel in afternoon trade. Brent North Sea crude for August, a new contract, was down 52 cents at $49.37.
Tokyo stocks dropped 1.6 percent, snapping a five-day winning streak, as the yen surged on news that Japan's prime minister would delay a sales tax rise that threatened the nation's fragile economy.
Shinzo Abe said the rise to 10 percent from eight percent, planned for 2017, would now be pushed back by more than two years to late 2019.
The dollar dived to 109.77 yen from 110.73 Tuesday in New York.
But mobile carrier SoftBank bucked the downtrend, climbing 0.38 percent to 6,252 yen on news that it will sell at least $7.9 billion of its stake in Chinese e-commerce giant Alibaba.
SoftBank said it would reduce its 32.2 percent holding in the Chinese company to about 28 percent, and use the proceeds to pay down its huge debt load.
- China data 'underwhelming' -
Chinese stocks were lacklustre as the nation released official manufacturing data for May.
The official Purchasing Manager's Index (PMI), which tracks activities in factories and workshops, came in at 50.1.
Any reading above 50 signals expanding activity, while anything below indicates shrinkage, but Julian Evans-Pritchard of Capital Economics said readings for May were "underwhelming".
"Although they suggest that activity held up reasonably well last month, they also offer few signs of improvement," he said.
Shanghai closed down 0.1 percent after surging on Tuesday while Hong Kong had lost 0.4 percent in the afternoon.
China's economy, the world's second-largest, is a vital driver of global expansion, and investors watch the PMI figure closely as the first available indicator each month of how well the economy is doing.
The key manufacturing sector has been struggling for months in the face of sagging global demand for Chinese products.
In early European trade, London retreated 0.7 percent, while Frankfurt and Paris eased 0.5 percent.
- Key figures around 0730 GMT -
Tokyo - Nikkei 225: DOWN 1.6 percent at 16,955.73 (close)
Shanghai - Composite: DOWN 0.1 percent at 2,913.51 (close)
Hong Kong - Hang Seng: DOWN 0.4 percent at 20,732.03
Euro/dollar: UP at $1.1141 from $1.1131 on Tuesday
Dollar/yen: DOWN at 109.77 from 110.73 yen
New York - Dow: DOWN 0.5 percent at 17,787.13 (close)
London - FTSE 100: DOWN 0.7 percent at 6,189.95