Most major Asian markets ended lower Wednesday after mixed signals from China's purchasing managers' index (PMI) surveys and better-than-expected Australian economic growth.
Australia's gross domestic product (GDP) came in well above expectations, rising 3.1 percent on-year in the first quarter, compared with a Reuters poll forecast for 2.8 percent growth.
That sent the Australian dollar surging to as high as $0.7299 from around $0.7230 before the data. The Aussie was fetching $0.7267 at 2:18 p.m. SIN/HK time.
Australia's stocks initially trimmed losses after the data, but never turned positive. The S&P/ASX 200 ended down 1.03 percent, or 55.36 points, at 5323.20 after being down as much as 1.34 percent before the data. Most sub-indexes remained in the red. The heavily weighted financial sub-index dropped 1.09 percent, while the energy sector fell 1.77 percent.
While the growth data initially spurred expectations that the Reserve Bank of Australia might hold back any interest rate cuts, some analysts said that with inflation remaining low and much of the growth driven by exports, rate cuts from the current record low 1.5 percent may still be on the cards.
The Nikkei 225 ended down 1.62 percent, or 279.25 points, at 16,955.73, likely weighed by the yen taking a leg higher and after media reports confirmed that Prime Minister Shinzo Abe is likely to announce a delay to a sales tax hike planned for next year until 2019. While the news was largely expected, it may rekindle concerns about Japan's ability to handle its government debt load, which tops 200 percent of GDP.
A weakness in public finances could also spur ratings agencies to downgrade the country's debt.
"If Japan's government has decided to delay the consumption tax increase scheduled for April 2017 as reports indicate, it would undermine the credibility of the political commitment to fiscal consolidation," Fitch Ratings said in a note Wednesday afternoon. It added that it would await more details on the government's new fiscal plans before saying how it would affect the country's ratings.
The dollar was fetching 109.85 yen at 3:34 p.m. SIN/HK, with the dollar-yen currency pair down from levels over 111 on Tuesday.
The Shanghai Composite ended down 0.08 percent, or 2.41 points, at 2914.21 after wavering between positive and negative territory. On Tuesday, the index jumped 3.32 percent on Tuesday in the wake of a Goldman Sachs report Tuesday that raised the probability of A-share inclusion in the MSCI indexes to 70 percent from 50 percent previously. The MSCI will announce the results of its Annual Market Classification Review on June 15, which may see the A-share market included in the index.
Some have doubts that a "yes" from MSCI will spur a surge of funds into China's markets.
"A-shares would probably be dripped into the MSCI Emerging Markets Index in small tranches," David Rees, senior markets economist at Capital Economics, said in a note Tuesday.
"What's more, while some investors who track indices such as the MSCI Emerging Markets Index would automatically enter Chinese markets, there might not be a flood of speculative purchasers," he added, noting that economic growth on the mainland is unlikely to return to its previous "stellar" rates and that credit concerns remain a dark cloud.
In South Korea, the Kospi ended flat, edging down just 0.03 percent, or 0.68 point, to 1982.72, likely getting support from a 3.17 percent gain in heavily weighted Samsung Electronics.
Markets didn't get much impetus in either direction from China PMI data.
The official PMI, which focuses on larger companies, came in at 50.1 for May, steady with April's level and a tick above a Reuters poll forecast for 50.0. Levels above 50 indicate expansion.
The official non-manufacturing PMI, which measures services, slipped to 53.1in May from April's 53.5. The services sector now accounts for more than half of China's GDP.
The Caixin China manufacturing PMI survey, which focuses on small to medium-sized enterprises, fell to 49.2 from 49.4 in April, compared with expectations for 49.3 from a Reuters poll.
"The PMI readings for May were underwhelming. They suggest that activity held up reasonably well last month, but they also offer few signs of improvement," Julian Evans-Pritchard, a China economist at Capital Economics, said in a note Wednesday.
Traders will be watching for news from the OPEC meeting to be held Thursday in Vienna, but not many will be expecting a deal to cut output.
Reuters reported that UAE Oil Minister Suhail bin Mohammed al-Mazroui said he was happy with the oil market, noting oil prices have risen recently.
Aircraft leasing company BOC Aviation was trading at 42.05 Hong Kong dollars at 2:32 p.m. SIN/HK on its trading debut in Hong Kong, just a tad above an initial public offering (IPO) price of HK$42, after giving up gains of as much as 4.4 percent earlier in the day. The IPO of the Bank of China subsidiary raised $1.1 billion and counted sovereign wealth fund CIC and Boeing as investors, according to a Reuters report. BOC Aviation is the world's fifth-largest aircraft lessor by fleet size and fourth-largest by fleet value, according to its IPO prospectus, Reuters reported.
Shares of Japan's Softbank bucked the market, rising 0.39 percent after news it planned to sell $7.9 billion worth of U.S.-listed Alibaba shares to improve its leverage ratio, cutting its stake to around 28 percent from around 32 percent.
In Japan, exporters were mostly lower in the wake of a stronger yen, which weighs on overseas earnings when they are translated back into the home currency.
Virgin Australia tacked on 1.67 percent, extending Tuesday's 7.14 percent jump after it announced that China's HNA Aviation would buy a 13 percent stake in the Australian airline for A$159 million ($114 million). The Australia-China airline alliance aimed to capitalize on the growing tourism market between the two countries, Reuters reported.
Toyota ended down 0.48 percent. The Nikkei Asian Review reported during market hours that the Japanese automaker's robotics arm is nearing a deal to purchase two major robotic companies -- Boston Dynamics and Schaft -- from Google.
In Taiwan, Largan Precision ended up 4.04 percent. Credit Suisse upgraded the stock to "outperform," saying a muted high-end smartphone demand outlook is priced in and it expects the dual-camera adoption rate in iPhone will increase next year.
Markets likely found few cues from Wall Street, which closed mixed after disappointing reads on consumer confidence and regional manufacturing.
"U.S. data is incredibly important at the moment as the market is looking for anything that may upset an increasingly expected July rate hike," IG market analyst Angus Nicholson said. "Investors are looking for major disappointments in U.S. data, and last night did not provide that with most coming largely in-line with what the market was expecting."
The closed down 86.09 points, or 0.48 percent, at 17,787.20 points, squeaking out a 0.08 percent gain for the month of May. The S&P 500 closed down 2.11 points, or 0.10 percent, at 2,096.95, totting up a 1.53 percent gain for the month. The closed up 14.55 points, or 0.29 percent, at 4,948.05, rising 3.62 percent for the month.
—Evelyn Cheng contributed to this report.
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1