Markets in Australia, Japan, and South Korea closed down after a choppy trading session Wednesday, despite a positive finish in Wall Street overnight.
Down Under, the S&P/ASX 200 slipped 27.93 points, or 0.57 percent, to 4,882.10, weighed by losses of 4.15 percent in the energy sector.
Japan's gave up early gains of as much as 1 percent to finish 218.07 points, or 1.36 percent, lower at 15,836.36. Across the Korean strait, the Kospi dropped 4.36 points, or 0.23 percent, to 1,883.94, with the healthcare sector losing 4.31 percent.
Hong Kong's gave up morning gains to close down 197.51 points, or 1.03 percent, at 18,924.57.
Bucking the trend was the Chinese market, where the retraced losses to close up 31.13 points, or 1.10 percent, at 2,867.69. The Shenzhen composite added 25.94 points, or 1.42 percent, to 1,847.64.
Earlier, in a morning note, Rodrigo Catril, a currency strategist at the National Australia Bank said, "The global equity rally that began on Friday has started to show signs of fatigue," noting that most European indices ended marginally lower on Tuesday. The positive finish in the U.S. was partly due to indexes there playing catch up after a long weekend, he added.
The U.S. market was closed on Monday for the President's Day holiday.
Jeff Knight, global head of investment solutions at Columbia Threadneedle Investments told CNBC's "Squawk Box" that rallies in stock markets, like the one on Wall Street overnight, should be looked at with the bigger picture in mind.
"It's important to keep it in perspective of what's been going on this year, not to get too lulled by strong up days," he said, pointing out that despite recent gains made by major indexes around the world, many of them are still sharply down on year-to-date.
"Big up days often times don't signal the all clear," he said. "They just simply represent the upside of the volatility that's affecting markets in both directions."
But Juan Prada from Barclays had a different take, suggesting in an early morning note that the gain in U.S. equities overnight was driven by "consumer discretionary, industrials and financials," adding that risk aversion was mostly subdued despite the overnight fall in oil prices. U.S. core retail sales data topped expectations on Friday, rising 0.6 percent in January after an unrevised 0.3 percent slip in December.
Overnight, a Bank of America Merrill Lynch fund manager survey for February showed market pros had gotten so nervous that portfolio managers' cash allocations were at November 2001 highs.
In Asian hours, U.S. crude futures were down 0.52 percent at $28.89, a barrel, while the global benchmark Brent was down 0.31 percent at $32.08.
Energy plays across the board were mostly lower, with Santos shedding 3.52 percent, Woodside Petroleum falling 6.94 percent and Inpex down 6.74 percent.
Hong Kong-listed shares of CNOOC Limited, Petrochina, and Sinopec Corp ended lower between 3.02 and 3.95 percent. Mainland shares of China Petroleum and Petrochina closed up 1.13 and 2.31 percent, respectively.
Late afternoon on Wednesday, Moody's Investors Service said in a note it had placed several Chinese national oil companies, and their rated subsidiaries, on review for downgrade. The companies include China National Petroleum Corporation, China Petrochemical Corporation (Sinopec Group), China Petroleum and Chemical Corporation (Sinopec Corp), China National Offshore Oil Corporation (CNOOC Group), and CNOOC Limited.
The company said the move, "follows Moody's global rating actions on many energy companies, reflecting Moody's effort to recalibrate the ratings in the energy portfolio to align with the fundamental shift in the credit conditions of the global energy sector."
Oil briefly rallied in the overnight session in the U.S., after Saudi Arabia, Russia, Qatar and Venezuela said they would lead an effort to freeze output at January levels. This was despite the fact the potential agreement dashed hopes of a deal to cut production.
Evan Lucas, market strategist at IG, wrote in his morning epistle, "OPEC nations will freeze production at January levels, which was 43.1 million barrels of oil a day. Interesting, considering January levels were a record and were producing 1 million barrels a day above demand. That, coupled with EIA stockpiling, registered record levels in January."
This is the first major accord of its type in 15 years, with the last accord in 2001, and the one before in 1998.
Lucas said, "What also makes this accord interesting is that history would suggest Russia is the one to watch. It was the first to break the 2001 and 1998 accords due to 'not enough action' taken by other OPEC nations."
"The agreement is not signed and nor is there signs it will even materialize considering the clause around other nations acting," he added.
Iran, which re-entered the international market this year after U.S.-led sanctions on the Persian state were lifted, swiftly said it would not reduce its share of the oil market. Reuters, citing sources familiar to the matter, reported that the OPEC member could be offered special terms under a global deal to freeze oil production levels.
Japan's economic growth prospects received a slight boost this morning when government data showed core machinery orders, which exclude ships and electric power utilities, for December rose 4.2 percent on-month and that companies expect orders to accelerate further in January-March quarter.
Exporters finished mostly down with Toyota falling 2.78 percent while Sharp bucked the trend to close up 3.31 percent. The dollar-yen pair traded down 0.28 percent at 113.75 in the afternoon. Overnight, the dollar gained against most G10 currencies with the exception of the yen. A stronger yen is usually a negative for export stocks as it reduces their overseas profit when converted into local currency.
Shares of Takata were down 2.37 percent. Overnight reports said U.S. carmarker General Motors was recalling about 200,000 vehicles of its former brands Saab and Saturn because they had potentially defective air bag inflators made by Takata.
Softbank shares extended gains from Tuesday to closing up 5.84 percent after the internet and telecom giant announced a 500 billion yen share buyback plan.