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Equities sank Friday as optimism over expected US interest rate cuts was offset by uncertainty about the US presidential election and a lack of economy-boosting measures from Chinese leaders after a closely watched policy meeting.
Investors were already on edge after a report said the White House was considering a crackdown on firms supplying chip technology to Beijing, and following Donald Trump's call for Taiwan to pay Washington for help defending itself against China.
Markets have been enjoying a healthy run-up as Federal Reserve officials, including boss Jerome Powell, have lined up in recent days to suggest they are ready to begin reducing rates owing to a slowdown in inflation and a softening in the labour market.
Data Thursday provided fresh room for the central bank to act, with initial jobless claims rising more than expected last week.
Traders are now all but certain of a move in September, with some even suggesting there could be more in the last few months of the year.
However, the tech sector -- which has led the surge in stocks this year -- has taken a hefty hit after the report of the warning from the White House over supplying China and Trump's remarks over Taiwan, home to some of the world's biggest chip producers.
There is also growing uncertainty over who will run against Trump in November's presidential election, as calls for President Joe Biden to step aside continue to grow following a series of gaffes and a poor debate that have raised questions about his health.
The New York Times cited several people close to Biden as saying they believe he has begun to accept that he may not be able to win and may have to drop out, with one quoted as saying: "Reality is setting in."
Former president Barack Obama has reportedly told allies his former vice president should "seriously consider the viability of his candidacy", The Washington Post reported.
While a Trump win is seen as positive for equities owing to likely tax cuts and corporate deregulation, there are worries about his plans to impose huge tariffs on Chinese imports -- and those from elsewhere -- which many say could fuel inflation again.
A closely watched meeting of China's leaders in Beijing this week provided nothing concrete by way of supporting the world's number two economy.
The Third Plenum, which meets twice a decade to decide key policies, saw few policy announcements, with state news agency Xinhua saying they had agreed to "prevent and resolve risks in key areas such as real estate, (and) local government debt".
They also vowed to "actively expand domestic demand" days after data this week revealed retail sales -- a gauge of consumption -- rose far less than expected in June. Figures on Monday also showed gross domestic product grew much slower than forecast in the second quarter.
Economists at HSBC said: "The communique's emphasis on 'opening up as a distinctive feature of China's modernisation' is worth noting. We expect the government to prioritise reforms that will facilitate foreign investment.
They pointed to persistent cross-border outflows, which is weighing on the yuan, and noted that the currency would likely remain under pressure owing to the big difference in US and Chinese interest rates, which makes it harder to attract investors.
"With the (yuan's) yield disadvantage likely to stay wide for longer, China needs more opening-up and market-oriented policies to attract or retain foreign investment.
"This may help reduce imbalance in cross-border flows, and thus alleviate (yuan) depreciation pressure."
Harry Murphy Cruise at Moody's Analytics added that ahead of the plenum "we called for reforms around property, tax, and local government debt, as well as support for private firms and investment, all of which got a mention".
However, while he acknowledged the meetings map out a long-term view, "this was still a missed opportunity".
Shares in Hong Kong fell owing to a lack of policy detail, though Shanghai eked out a gain. There were also losses in Tokyo, Sydney, Seoul, Singapore, Mumbai, Bangkok, Taipei, Wellington and Jakarta.
Paris and Frankfurt opened lower.
The retreat followed another bad day on Wall Street, where the Dow dived after three days of record highs.
- Key figures around 0715 GMT -
Tokyo - Nikkei 225: DOWN 0.2 percent at 40,063.79 (close)
Hong Kong - Hang Seng Index: DOWN 1.8 percent at 17,455.03
Shanghai - Composite: UP 0.2 percent at 2,982.31 (close)
Euro/dollar: DOWN at $1.0888 from $1.0900 on Thursday
Pound/dollar: DOWN at $1.2939 from $1.2946
Dollar/yen: DOWN at 157.00 yen from 157.36 yen
Euro/pound: DOWN at 84.16 pence at 84.17 pence
West Texas Intermediate: DOWN 0.6 percent at $82.30 per barrel
Brent North Sea Crude: DOWN 0.5 percent at $84.69 per barrel
New York - Dow: DOWN 1.3 percent at 40,665.02 (close)
London - FTSE 100: UP 0.2 percent at 8,204.89 (close)
S.Weaver--TFWP