Stocks in Asia were lower on Tuesday following an overnight sell-off on Wall Street sparked by concerns of a slowdown in the global economy. A key speech by Chinese President Xi Jinping did not help lift market sentiments in Asia.
40th anniversary of China reforms
The mainland Chinese markets saw losses on Tuesday. The Shanghai composite slipped 0.82 percent to close at about 2,576.65 and the Shenzhen composite was lower by 0.813 percent to finish the day at around 1,312.55.
In Hong Kong, the Hang Seng index declined by more than 1 percent in its final hour of trade.
In an address to commemorate the 40th anniversary of China's economic reforms on Tuesday, Xi called for his country to "stay the course" on its current path of reform and emphasized that "no one is in a position to dictate to the Chinese people what should or should not be done."
Xi's remarks were being closely watched as investors sought clues on whether the Chinese leader's idea of progress aligned with the West's increasingly vocal demands for less state control, which could have implications on whether the U.S. reaches a trade deal with China by the end of its 90-day tariff ceasefire.
Ahead of that speech, one economist told CNBC's "Street Signs" cautioned investors not to expect a "dramatic announcement or surprise by the Chinese government."
"First of all, that's the style of the Chinese government," said Chi Lo, senior economist of Greater China at BNP Paribas Asset Management.
Chi also added that Beijing "really wants stability on all fronts to go ahead" instead of causing any potential excitement or volatility which could "hurt sentiment towards China."
Asian stocks see declines
Japan's Nikkei 225 fell 1.82 percent to close at 21,115.45 while the Topix index declined by 1.99 percent to end the trading day at 1,562.51. Shares of industry heavyweight Fast Retailing fell 1.61 percent.
Over in South Korea, the Kospi slipped 0.43 percent as shares of chipmaker SK Hynix declined by 1.77 percent.
The ASX 200 in Australia also fell and was lower by 1.22 percent to close at 5,589.5, with almost all sectors seeing losses on the day.
The heavily weighted financial subindex fell 1.50 percent as shares of Australia's so-called Big Four banks saw losses on Tuesday. Australia and New Zealand Banking Group fell 2.95 percent, Commonwealth Bank of Australia slipped 0.95 percent, Westpac declined by 1.38 percent and National Australia Bank shed 1.78 percent.
Wall Street slump
In the U.S. markets, stocks fell sharply ahead of the Federal Reserve Bank's anticipated rate hike this week.
The S&P 500 fell 2 percent to 2,545.94 — its lowest close for 2018. The Dow Jones Industrial Average also plunged 507.53 points to close at 23,592.98, ratcheting up a combined two-day loss of more than 1,000 points.
All 30 stocks in the Dow and all 11 sectors in the S&P 500 posted losses on Monday.
The Dow and S&P 500, which are both in correction territory, are on track for their worst December performance since the Great Depression in 1931, down more than 7 percent so far for the month. The S&P 500 is now in the red for 2018 by 4 percent.
The Nasdaq Composite also saw declines, falling 2.2 percent to end the trading day at 6,753.73.
The Cboe Volatility Index — one of Wall Street's gauges of market fear — rose above 25 and volume for the stock market was heavier than usual.
The Fed is widely expected to hike its benchmark overnight lending rate for a fourth and final time of 2018 on Wednesday. While fears of rising interest rates and an ambitious central bank have spooked markets throughout the year, such concerns have heightened over the past month as inflation and growth expectations recede.
U.S. President Donald Trump took aim at the Fed again on Monday, saying in a tweet that "it is incredible" that the central bank was "even considering yet another interest rate hike" amid the "outside world blowing up around us."
Trump has openly criticized the Fed, as well as Chairman Jerome Powell, multiple times this year. The president has gone so far as to say the Fed has "gone crazy" with monetary policy, and thinks "the rate's too high."
The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 97.139 after touching an earlier low of 97.036.
The Japanese yen, widely viewed as a safe-haven currency, traded at 112.55 against the dollar after seeing lows around the 113.5 handle in the previous session. The Australian dollar was at $0.7182 after seeing an earlier low of $0.7170.
— CNBC's Evelyn Cheng, Thomas Franck and Michael Sheetz contributed to this report.