Asian shares fell for a second straight session on Tuesday as some of the confidence that fueled a rally in stocks to seven-month highs was undermined by reports highlighting economic weakness.
European shares were also set to fall, while investors shifted to assets seen as safer during volatile times, including the yen.
Sentiment was hit by data on Tuesday showing China's exports in April fell more steeply than expected from a year earlier, casting fresh doubt on the prospects for recovery in the world's third largest economy. Imports also dropped.
Hopes of a recovery in China on the back of big government spending had fueled a surge in equity markets from lows in early March, as investors bet on a turnaround in the global economy.
Exports are still falling, and the future of the world economy remains uncertain. It's really hard to be optimistic about China's trade prospects, said Qi Jingmei, an economist with the State Information Center in Beijing.
The MSCI index of Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> lost 1.8 percent as of 0625 GMT (2:25 a.m. EDT).
That marked the second session of losses for an index that just on Monday had hit its highest level since early October. Still, it is up about 50 percent since early March.
Japan's Nikkei average <.N225> fell 1.6 percent, retreating from its highest close in six months on Monday.
The declines come as debate about the outlook for the global economy is confounded by the mixed nature of recent reports.
Optimists pointed to a survey from the Organization for Economic Co-Operation and Development on Monday that noted the pace of the decline in the world's major industrialized and emerging economies was easing.
Leading central bankers, including ECB President Jean-Claude Trichet, on Monday also suggested the global economy was turning the corner.
The South Korean central bank forecast mildly positive quarterly growth in coming months for an economy that just skirted a recession in the first quarter, but said risks remained so it would keep an accommodative monetary policy. It left rates at a record low of 2.0 percent as widely expected.
However, other reports have not been too rosy. Industrial production in France and Italy dropped more sharply than expected in March, data showed on Monday, in a bad omen for the eurozone economy.
India also reported on Tuesday that industrial output fell in March more than expected from a year earlier.
In Asia, Shanghai's main index <.SSEC> was flat. Hong Kong's shares <.HSI> fell 0.9 percent, though shares in HSBC <0005.HK> advanced 1.1 percent after the British lender on Monday said first-quarter profits were well ahead of last year.
But with the exception of HSBC, Asian financial shares including Mitsubishi UFJ Financial Group <8306.T> dropped following a rally that had tracked gains in U.S. banking shares.
Taiwan's main index <.TWII> slumped 3.2 percent, while other major indexes such as Australia <.AXJO> and Singapore <.FTSTI> lost about 1 percent each.
WHERE TO NEXT?
Renewed market uncertainty this week has benefited currencies seen as safe havens, such as the Japanese yen.
The dollar fell 0.2 percent from late New York trade to 97.29 yen after dropping as low as 97.13 yen earlier on trading platform EBS.
The dollar index, a gauge of the greenback's performance against six major currencies, slipped 0.3 percent to 82.628 <.DXY>, though that is still above the four-month low of 82.292 touched on Monday.
The euro edged up 0.2 percent to $1.3605, near a seven-week peak of $1.3670 hit on Monday.
The market returned to being a little more cautious about reading economic fundamentals after optimism reigned in the past few months, said Hideaki Inoue, chief manager of forex trading at Mitsubishi UFJ Trust Bank.
Oil futures slumped 64 cents to $57.86 a barrel after hitting a near six-month high of $58.75 on Friday.