Uncertainty over the global economy weighed on Asian markets Wednesday as the tailwind from the China-US trade ceasefire petered out, while oil prices struggled to claw back the previous day's hefty losses.
While some tensions on trading floors have eased since Donald Trump and Xi Jinping's proclamation that negotiations were back on, analysts pointed to long-running concerns about weak growth and central banks' willingness to act.
Shanghai was one of the biggest losers after the head of the People's Bank of China appeared to temper expectations for near-term stimulus measures for the world's number two economy.
Yi Gang said growth was near potential, interest rates were about right and monetary policy was accommodative enough to absorb various situations.
"Gang sent more hawkish signals by tempering expectations for significant credit growth in (the second half of) 2019" following the positive outcome of the Trump-Xi meeting, said Stephen Innes at Vanguard Markets.
"If this is true, it's horrible for a market that was positioning for a fillip from a PBoC policy response and a noteworthy shift from his dovish remarks just a few weeks ago that there is 'tremendous room' for additional policy stimulus in China."
The remarks come soon after data showed factory activity in China continued to shrink in June, adding to worries about the key driver of global growth as economies struggle to deal with the effects of the trade war.
Traders are also nervously awaiting the Federal Reserve's next policy meeting this month, with a 25 basis point cut in borrowing costs largely priced into markets, but with many hoping for double that figure.
The release of US jobs data on Friday is now in investors' sights, with a weak reading likely to put pressure on the bank to announce slash deep this month.
- Trump's 'next trade battle' -
Adding to the sense of dread, Bank of England boss Mark Carney warned of a "widespread" slowdown in the world economy from rising protectionism.
His comments came as it emerged that the White House had proposed tariffs on $4 billion in European imports over European subsidies for commercial aircraft.
"Trade optimism is beginning to fade as the truce with China is not even a week old and the US is looking for its next trade battle," said OANDA senior market analyst Alfonso Esparza.
In morning trade Hong Kong was down 0.3 per cent, Shanghai shed one percent and Tokyo lost 0.7 percent by the break.
Singapore fell 0.4 per cent, Seoul dropped 0.8 per cent, Taipei gave up one per cent and Jakarta shed 0.2 per cent, though Sydney was up 0.4 per cent.
Oil prices edged up slightly after data showed another drop in US stockpiles, but they were nowhere near biting into the more than four per cent falls suffered Tuesday on demand fears.
The commodity has already had a volatile week, having surged Monday on the back of the announcement by Russia and Saudi Arabia that they will extend their output caps. The move was confirmed by the two and other OPEC members at the group's meeting Tuesday.
"Growth concerns continue to weigh on the crude market and the markets are beginning to query to what extent can OPEC continue to cut production in sustaining prices," Howie Lee, an economist at Oversea-Chinese Banking Corp, told Bloomberg News.
"Production levels have already been severely reduced and there is limited scope for further supply curbs."
- Key figures around 0240 GMT -
Tokyo - Nikkei 225: DOWN 0.7 per cent at 21,608.73 (break)
Hong Kong - Hang Seng: DOWN 0.3 per cent at 28,718.88
Shanghai - Composite: DOWN 1.0 per cent at 3,013.51
Euro/dollar: UP at $1.1294 from $1.1289 at 2130 GMT
Dollar/yen: DOWN at 107.56 yen from 107.88
Pound/dollar: UP at $1.2599 from $1.2593
West Texas Intermediate: UP 47 cents at $56.72 per barrel
Brent North Sea crude: UP 52 cents at $62.92 per barrel
New York - Dow: UP 0.2 per cent at 26,786.68 (close)
London - FTSE 100: UP 0.8 per cent at 7,559.19 (close)