HONG KONG: Asian stocks finished Tuesday on the back foot, following Wall Street lower as fears of a trade war between the United States and China hit market sentiment.
China led the declines, with the main Shanghai Composite index down more than one percentage point heading into the final hour of trade.
In Tokyo, the benchmark Nikkei 225 index slipped 0.45 percent or 96.29 points to 21,292.29, paring early losses.
Markets in Seoul and Hong Kong were also weaker, with New Zealand the only regional exchange in the green.
However, the losses were not as bad as first feared at the open, with stocks across the region clawing back ground later in the session.
"The impact from the US market turned out not to be so bad as to incite terror here" thanks to lingering hopes that tensions may ease in the weeks to come, noted Makoto Sengoku, market analyst at Tokai Tokyo Research Institute.
Traders were however spooked by Chinese retaliatory action on trade with the US, as the government in Beijing slapped tariffs on 128 US imports worth $3 billion, including fruit and pork.
In addition to that move, US President Donald Trump again threatened to tear up the North American Free Trade Agreement, tweeting that Mexico was doing too little to counter illegal immigration into the United States.
Investors also took their cue from US markets which tumbled on the first trading session back after Easter holidays, both on trade fears and a bearish turn for tech stocks.
The Dow Jones Industrial Average closed 1.9 percent lower while the broad-based S&P 500 shed 2.2 percent.
But it was tech stocks that led the declines, with the Nasdaq dropping 2.7 percent.
Giants Amazon, Facebook and Tesla Motors suffered the largest drops but the negative feeling infected the broader market.
Amazon sank 5.2 percent after a series of attacks by Trump in recent days in which he accused the retailer of profiteering at the expense of the US Postal Service.
"It started with the tech stocks and it's become 'throw the baby out with the bathwater,'" said J.J. Kinahan, chief market strategist at TD Ameritrade.
"They're reassessing the valuation on the entire market," said Kinahan. "A while ago all news was good news. Now (the) news is all things to be afraid of."
With sentiment souring, the safe-haven yen strengthened earlier in the trading days before also falling back as equities pared losses.
The greenback was changing hands at 105.95 yen Tuesday afternoon against 106.29 yen a day earlier.
Against the unsettling background, "the yen has re-emerged as the weapon of choice," David de Garis, director of economics and markets at National Australia Bank, said in a commentary.
- Key figures around 0630 GMT -
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Tokyo - Nikkei 225: DOWN 0.5 percent at 21,292.29
Hong Kong - Hang Seng: DOWN 0.5 percent at 29,942.86
Shanghai - Composite: DOWN 1.17 percent at 3,126.11
Dollar/yen: UP at 105.96 yen from 105.76 at 0230 GMT
Euro/dollar: UP at $1.2310 from $1.2306 at 0230 GMT
Pound/dollar: UP at $1.4061 from $1.40
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