Asian Stocks
Asian Stocks Reuters

Asian stock markets extended declines on Thursday to hit fresh lows in 2013, as fears about the future of the Fed’s massive stimulus program and weaker-than-expected economic data out of the U.S. weighed on investor sentiment.

Japan's benchmark Nikkei index declined 0.71 percent, or 92.01 points to 12,922.86, Hong Kong's Hang Seng plunged 1.15 percent, or 254.59 points to 21,814.65, and India's BSE Sensex fell 0.72 percent, while South Korea's KOSPI slumped 1.52 percent.

Markets opened on a negative note as sentiment soured overnight after private employment and factory orders data from the U.S. failed to live up to expectations, fanning fears that the economic recovery in the world's largest economy is faltering.

Payroll firm ADP Employer Services said that the U.S. private sector added 135,000 jobs in May, up from the downward revised 113,000 jobs added in April, but missed a Reuters estimate of 165,000 new jobs for May. Factory orders also disappointed with a rise of 1 percent, falling short of the 1.5 percent gain expected by a Reuters poll.

The ADP data came two days before the government's monthly nonfarm payroll report, which is the most closely-watched economic indicator pertaining to the jobs market and is a key gauge for the direction and pace of the economic recovery.

“The Fed is putting out a feeler in the market with a stimulus-exit debate,” Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $70 billion, told Bloomberg. “The market gets sold after mediocre economic reports, while being bought on good ones. It’s repeating that zigzag pattern.”

Meanwhile, the U.S. services sector expanded at a faster rate than expected in May, but the labor sub-component declined to 50.1 -- its weakest level since July 2012 -- from 52 in the prior month.

ISM’s employment data and the tepid private sector hiring trend raised concerns that the official employment report for May, expected on Friday, would be worse than what the initial consensus had indicated. A Credit Agricole report has pegged this number at 150,000.

“Any positive reaction was fully negated by a drop in the employment component of the ISM report and a weaker than expected ADP jobs report which revealed only a 135k increase in jobs. Consequently there will be a scramble to revise down forecasts for May US non-farm payrolls released tomorrow,” a note from Credit Agricole said.

Earlier, U.S. stock markets had fallen steeply on Wednesday with the Dow Jones Industrial Average ending down 1.43 percent, the S&P 500 Index down 1.38 percent while the Nasdaq Composite Index ended the day down 1.27 percent.