Asian stocks fell to three-month lows on Monday with investors cautious after new data strengthened the case for tighter Chinese monetary policy and as attention focused on key U.S. economic reports due this week.
European shares <.FTEU3> were also expected to retreat by as much as 1.2 percent amid lingering worries about Greece and other weak euro zone members.
U.S. stock futures pointed to a slightly higher open after Wall Street ended lower on Friday despite data showing the U.S. economy grew at its fastest pace in six years in the fourth quarter. <.N>
Markets are bracing for a big week with a number of major central bank meetings across the world and a raft of economic reports out of the United States, culminating in the non-farm payrolls data on Friday.
Many of Asia's stock markets lost ground on Monday, rattled by U.S. losses last week, while Japan's Nikkei stock average <.N225> ended flat.
A correction in Asia is healthy, definitely. Prices have moved ahead quite well, said Alex Boggis, fund manager at Aberdeen Asset Management, which oversees about $240 billion in investments.
Obviously over the last year markets have moved ahead quite strongly based on ... a dramatically improving environment. But has it really dramatically improved?
Asia Pacific stocks outside Japan as measured by MSCI <.MIAPJ0000PUS> were off 0.84 percent, a 3-month low. The index lost 6.4 percent in January, its worst month in a year, after a 68 percent surge in 2009, as a host of unsettling factors prompted investors to take profits.
According to data from Nomura, foreigners sold nearly $4.1 billion in stocks in six Asian markets ex-Japan in the week ended January 31 -- led by $1.7 billion in Taiwan, $1.2 billion in India and $811 million in South Korea.
The U.S. dollar held at its highest levels in six months on Monday, while the euro huddled near seven-month lows on euro zone fiscal concerns, and higher yielding currencies remained pressured by the closing of leveraged trades.
Fresh worries over public finances of Greece, Portugal and other smaller euro zone countries have also weighed on global stocks. Fears that Athens will not be able to service its heavy debt have prompted investors to shun riskier investments.
Also high on investor radar screens has been China, where a pair of business surveys on Monday underlined the mounting challenge policymakers face to curb inflation in the world's third-largest economy.
An index based on an official survey of purchasing managers last month eased from a 20-month high in December but remained firmly in expansionary territory, while an index derived from a companion poll by HSBC scaled an all-time high.
Industrial activity continues to accelerate, implying stronger GDP growth in the first quarter. But rising input and output prices also point to greater inflationary pressure, which will likely prompt more tightening measures in the coming months, said Qu Hongbin, chief economist for China at HSBC.
The Shanghai Composite Index <.SSEC> fell 1.6 percent but Hong Kong's Hang Seng index <.HSI> managed to recoup early losses.
South Korean shares <.KS11> bucked the overall trend, ending up 0.25 percent, with automakers posting strong gains on firm January sales data and troubles at rival Toyota Motor Corp <7203.T>, which has been hit by a massive recall of vehicles.
Hyundai Motor <005380.KS> ended up 2.65 percent, while Kia Motors <000270.KS> closed 5.63 percent higher. Toyota, the world's top automaker, fell 1.15 percent after losing almost 14 percent last week.
Toyota will announce on Monday details of its plan to fix accelerator pedals that have led to the recall of 2.4 million cars in the United States as it scrambles to put its worst public relations crisis behind it.
The Australian dollar hovered at its weakest since mid-December as investors unwound yen-funded carry trades on a report that a UK regulator would like to restrain carry trading generally.
The euro teetered at its lowest since last July, holding just above $1.3850 where one trader reported talk of a barrier yet to be triggered. It tested that level several times.
U.S. Treasury bonds slipped but their losses were limited as many investors held back ahead of key economic data and events this week.
Before the jobs data on Friday, investors will get a snapshot of U.S. manufacturing sentiment on Monday and President Barack Obama will also make remarks on the U.S. budget at 1545 GMT (10:45 a.m. EST).
The benchmark 10-year notes edged down 5/32 in price to yield 3.609 percent, up about 2 basis points from late New York trade on Friday. T-note futures were unchanged at 118-05/32.
Oil prices steadied below $73 a barrel on Monday, pausing from the previous session's 1 percent decline which came as concerns about sluggish energy demand outweighed stronger-than-expected U.S. economic data.
NYMEX crude for March delivery edged lower to $72.75 a barrel by 0645 GMT (1:45 a.m. EST).
(Editing by Kim Coghill.)