Japan's Nikkei share average and oil prices hit six-week lows on Wednesday as investors pulled funds out of bets on the global economy's recovery and favored safe havens, such as the U.S. dollar and government bonds.
Comments that a second U.S. stimulus package may be necessary coupled with heavy U.S. job losses have taken the wind out of a rally in global stocks and commodities, tempering some of the optimism about how quickly growth will return.
Talk of more stimulus spending is making investors nervous, said Kim Seong-joo, an analyst at Daewoo Securities in Seoul.
Market players were also taking profits and striking a cautious stance before a slew of quarterly corporate earnings announcements around the world, which will be scanned for comments on the demand outlook.
The MSCI index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> dropped 1.4 percent to hit a two-week low, with energy and financial shares falling the most. The MSCI index of world shares <.MIWD00000PUS> shed 0.6 percent to a seven-week low.
On Tuesday the U.S. S&P 500 <.SPX> fell 2 percent to hit a seven-week low.
But Asian stock indexes proved resilient, with South Korea's KOSPI holding near a nine-month intraday peak and the Shanghai Composite near a 13-month peak, as solid Chinese growth has helped limit the fallout on some parts of the region.
Highlighting the diverging performance between emerging Asian stock markets and global developed markets, the MSCI benchmark for Asia excluding Japan is still up 27 percent so far this year compared with a 3.4 percent rise in world stocks.
Japan's Nikkei <.N225> was the hardest hit, falling 1.8 percent and down for a sixth straight trading day.
Shares of machinery makers such as Komatsu <6301.T> dropped after data showed new orders posted a surprising fall in May as demand from abroad faltered for a second straight month.
Economists at Deutsche Bank called the Japanese machinery figures a significant negative surprise and said they pointed to an continued glut in manufacturing capacity, suggesting that business spending would take a while longer to recover.
The yen pushed higher as investors reversed positions in higher-yielding currencies, which tend to benefit from rising stocks and commodities. The low-yielding yen is often used as a cheap source of funds to buy higher-yielding currencies in carry trades.
The dollar dipped 0.2 percent to 94.60 yen and touched a five-week low of 94.52 yen. The euro shed 0.3 percent to 131.50 yen and struck a six-week low.
The dollar index, a gauge of its performance against six major currencies, was steady at 80.747 <.DXY> having edged up as investors shed emerging market and other currencies for the greenback.
Government bonds extended their rally. The benchmark 10-year Japanese yield fell 2 basis points to 1.285 percent, a 3-1/2-month low and down 27.5 basis points in the past month as Japanese banks have shoveled funds into safe-haven debt.
Oil prices were down 63 cents a barrel to $62.30 and have shed more than $11 in a little more than a week. Gold was little changed at $923.35 an ounce.
(Additional reporting by Rhee So-eui in Seoul)
(Editing by Kazunori Takada)