Asian markets tracked hefty losses in New York on Wednesday owing to growing China-US tensions ahead of fresh trade talks, while the pound remained beaten down by fears Britain is on the verge of crashing out of the EU.
The downbeat mood comes as investors fret over signs the global economy is slowing down, with the International Monetary Fund forecasting the weakest growth in a decade owing to long-running tariff disputes.
Days before high-level negotiations were due to resume, the US announced restrictions on 28 Chinese entities over human rights violations in Xinjiang province and imposed visa restrictions on some officials.
Then Bloomberg News reported unnamed Trump administration officials had said the White House was mulling new measures to curtail US investment in the country.
For its part, Beijing has hit out at the decisions and moved to take steps against the National Basketball Association in a brewing row over a team manager's remarks on Hong Kong's protest movement.
"It will be interesting to see how it plays out this week between the US and China," Andrew Balls, at Pacific Investment Management, told Bloomberg News.
The flare-up comes "at a time when we already see growth pretty weak in the first half of next year and you have at least some evidence of weakness in manufacturing spilling into services".
While economic data has been increasingly weak in recent months, hopes for this week's talks have been providing some much-needed support. But the latest developments were a reminder that progress would likely be rocky.
- Talks on the brink -
All three main indexes on Wall Street sank and in early trade Hong Kong fell 0.3 per cent while Shanghai lost 0.2 per cent.
Tokyo went into the break 0.7 per cent lower, while Sydney was also off 0.7 per cent, Singapore dropped 0.5 per cent and Manila lost one per cent.
Wellington, Taipei and Jakarta were also in the red.
There was little support from comments by Federal Reserve boss Jerome Powell, who said the US economy would continue to expand but that trade wars and Brexit were causing headwinds.
The remarks suggested the bank was in no rush to cut interest rates further, with unemployment at a 50-year low, despite jobs creation slowing.
On currency markets, the pound struggled to recover from Tuesday's losses as Brexit talks between Britain and the European Union teetered on the brink, with both sides blaming the other with just three weeks until the October 31 deadline.
Prime Minister Boris Johnson and German Chancellor Angela Merkel were unable to reach an agreement over the Northern Ireland issue during a telephone conversation. A Downing Street official quoted Merkel as saying the Brexit talks were "close to breaking down".
With many economists warning a no-deal Brexit could be calamitous for the British economy, the pound tumbled against the dollar and euro and there were warnings it could fall even further.
With negative sentiment prevalent across trading floors, the price of oil extended losses as investors worry about the impact on demand for the commodity.
Key figures around 0230 GMT
Tokyo - Nikkei 225: DOWN 0.7 per cent at 21,442.98 (break)
Hong Kong - Hang Seng: DOWN 0.3 per cent at 25,817.05
Shanghai - Composite: DOWN 0.2 per cent at 2,908.10
Pound/dollar: UP at $1.2216 from $1.2213 at 2040 GMT
Euro/pound: UP at 89.73 pence from 89.69 pence
Euro/dollar: UP at $1.0962 from $1.0955
Dollar/yen: UP at 107.10 yen from 107.07 yen
West Texas Intermediate: DOWN 16 cents at $52.47 per barrel
Brent North Sea crude: DOWN 19 cents at $58.05 per barrel
New York - Dow: DOWN 1.2 per cent at 26,164.04 (close)
London - FTSE 100: DOWN 0.8 per cent at 7,143.15 (close)