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Asian share markets followed Wall Street into the red on Wednesday as surprising strength in global surveys of services stoked fears that central banks would have to lift interest rates yet further and keep them up for longer.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.97 per cent, after Wall Street posted its worst performance of the year on Tuesday, with an unexpectedly strong reading of S&P Global's composite purchasing managers' index (PMI) showing the US economy was not cooling yet.
"The flow of economic data surprises has continued overnight and this time it was a uniformly stronger than expected performance of the services sector across major developed market economies," National Australia Bank analysts wrote in a client note. "It concerns the market that central banks will have to hike rates a lot more to curb inflation," said Kerry Craig, JPMorgan Asset Management's global market strategist.
New Zealand's central bank raised interest rates by 50 basis points to a more than 14-year high of 4.75 per cent on Wednesday.
The central bank said it expected to keep tightening further to ensure inflation returned to its target range over the medium term.
The Bank of Japan said on Wednesday it would conduct emergency bond buying, in a move to contain elevated yields, as the 10-year JGBs touched 0.505 per cent for a second straight session, breaching the BoJ's 0.5 per cent cap and reaching the highest level since January 18.
Japan's Nikkei share index fell 1.25 per cent on Wednesday following a Tuesday PMI report showing the factory sector had contracted.
China's benchmark shed 0.68 per cent and Hong Kong's Hang Seng index dropped down 0.27 per cent.
Australia's S&P/ASX 200 index lost 0.25 per cent in early trading, falling for a second straight session and touching its lowest in more than a month on expectations of interest rate rises.
US 10-year notes touched 3.966 per cent, the highest since November, before easing to yield 3.9389 per cent on Wednesday.
The dollar index fell 0.077 per cent, but analysts expect interest rate rises to lift the dollar, hurting emerging market equities, which benefited from a falling dollar.
US crude fell 0.5 per cent to $75.98 per barrel and Brent was at $82.68, down 0.45 per cent.
Spot gold added 0.1 per cent to reach $1,836.18 an ounce.
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