Asian markets reversed early gains to trade lower Tuesday in lackluster trading, on course for their worst quarterly performance since the end of 2008. This mirrored a weak performance in the U.S. where Wall Street ended the session loweras investors digested mixed consumer data.
The tepid nature of the developed world's recovery from global recession kept investors cautious, with a general flight to relative safe havens prompting a rebound for gold and falls in U.S. and Japanese government debt yields to multi-month lows.
European debt worries also pushed investors to curb their willingness to bet on risky assets, including equities.
The Chinese stock market led the region lower, hitting a 14-month low, as tight liquidity in the local market forced investors to sell to make room for Agricultural Bank of China's initial public offering, potentially the world's largest IPO to date.
The key Shanghai Composite Index sank 4.3 percent to 2,427.1 points, its lowest close since April 2009.
The index, one of the world's worst performers, is down about 22 percent so far this quarter and 26 percent for the year.
Institutions will start subscribing to the Shanghai portion of AgBank's dual Shanghai-Hong Kong IPO on Thursday, while retail subscriptions are scheduled for early next week.
Analysts are forecasting AgBank's Shanghai IPO will attract subscription funds of 2 trillion to 3 trillion yuan ($294-441 billion), worsening a shortfall of funds in China's money market.
Japan's Nikkei average retreated 1.3 percent, erasing earlier gains as exporters fell on a stronger yen. The benchmark is poised for its worst quarter since Lehman Brothers failed in 2008.
The session was marked by thin volume, at a four-month low, and market players said trading activity was likely to stay that way as the market awaits a series of economic indicators this week including the Bank of Japan's quarterly "tankan" survey of corporate sentiment on Thursday and U.S. jobs data on Friday.
Though the Nikkei edged up in morning trade, it reversed course from the start of the afternoon as the yen advanced across the board, with Japanese exporters repatriating profits before the second quarter ends later this week.
The dollar fell 0.7 percent to 88.79 yen, its lowest in six weeks, while the euro lost 0.9 percent to 108.72.
The Nikkei shed 123.27 points to 9,570.67, with the broader Topix slipping 1.0 percent to 852.19.
Shares of exporters slid, hurt by the yen's strength as it eats into exporters' profits when they are repatriated.
Canon lost 2.7 percent to 3,395 yen and Tokyo Electron fell 1.6 percent to 5,010 yen. Honda Motor declined 1.3 percent to 2,647 yen.
Trading houses posted losses as metals prices fell, with London copper sliding more than 1.5 percent as concerns about economic recovery continued to weigh on the market.
Mitsui & Co shed 3.2 percent to 1,075 yen, Itochu lost 1.9 percent to 721 yen, and Marubeni fell 1.7 percent to 466 yen.
Investors initially shrugged off a decline in May industrial outputdata following two straight months of gains, suggesting the benefits of an export rebound to fast-growing nations may be moderating.
Other data showed Japan's jobless rate edged higher in May but the availability of new jobs improved, as the labor market stages a spotty recovery after the economy emerged from recession last year, while household spending unexpectedly fell in May.
Seoul shares also lost ground despite a strong start, to finish 1.40 percent lower as sentiment turned negative amid renewed economic concerns and sharp falls in Chinese stocks.
The Korea Composite Stock Price Index (KOSPI) closed 24.27 points lower at 1,707.76.
Issues particularly sensitive to the Chinese economy, such as steelmakers and shipyards, led losses.
POSCO, the world's No.4 steelmaker, declined 2.56 percent and Hyundai Heavy Industries dipped 1.22 percent.
Falls in automakers also weighed, as Hyundai Motor, South Korea's No.1 automaker, shed 2.07 percent percent and Kia Motors lost 2.55 percent.
But airlines outperformed amid hopes for "record quarterly profits," according to NH Investment & Securities analyst Jee Hyeon-seok.
Asiana Airlines ended up 5.22 percent at 9,670 won, after hitting a historical high of 9,960 won earlier in the session.
Retailer stocks rose on news South Korean retailers expected their sales for the second half of the year to be 6.7 percent more on average than what they had projected six months ago.
Lotte Shopping, the country's top retailer, advanced 1.85 percent and Shinsegae gained 0.95 percent.
Australian stocks lost 0.9 percent on Tuesday to end at a three-week low, as worries about the global economy outweighed end of fiscal year book-squaring and hopes for a deal on a mining tax.
The market is on track to finish the quarter down 10.9 percent, its worst quarterly performance since late 2008 after the collapse of Lehman Brothers and the full-scale eruption of the global financial crisis.
New Australian Prime Minister Julia Gillard said she is confident of ending the politically damaging mining tax dispute, amid speculation she may call an election within weeks to capitalise on her honeymoon period as leader.
Among the big miners, Rio Tinto lost 0.3 percent and BHP Billiton declined 1.0 percent as investors debated how far Gillard's government will go in modifying her predecessor's mining tax proposal.
The benchmark S&P/ASX 200 index lost 38.9 points to 4,345.7, the sixth straight loss, in light volume.
New Zealand's benchmark NZX 50 index ended down 0.6 percent to 2,991.1.
Downer EDI shares sank after the engineering firm denied reports that one of its divisions had stopped payments to suppliers to meet cashflow targets, and said it had ample liquidity.
Downer hit its lowest level since March 2009 and ended 6.3 percent lower at A$3.74.
Tatt's Group shares fell 0.9 percent to A$2.23 after the gaming group cut the book value of its UK gaming machine business Talarius by A$140 million, on the expectation that consumer spending will be crimped by a tough emergency budget there.
Taiwan stocks closed 1 percent lower on Tuesday as the boost from a landmark trade deal with China faded.
The main TAIEX index fell 77.22 points to 7,423.57, having risen as much as 1.1 percent earlier in the session.
The signing of the bilateral economic cooperation framework agreement (ECFA) took place after the market closed. The pact opens the way for a major boost to trade between Taiwan and China. The government has been pushing the deal heavily and media reports cited President Ma Ying-jeou as saying the deal could add 2 percent to GDP.
Hong Kong stocks skidded over 2 percent with weak mainland markets and a lower close on Wall Street weighing on sentiment.
The benchmark Hang Seng Index fell 2.3 percent.
In Southeast Asia, Singapore's Straits Times Index lost 1.4 percent while the KL Composite dropped 0.4 percent.