After March's banking sector-sparked turmoil, markets have enjoyed a few bright weeks on optimism the US Federal Reserve will temper its interest rate hikes earlier than thought.
The rally continued at the start of this week, even after a shock cut in oil output by major producers sent prices soaring and reignited worries over inflation, which has been coming down in the past months.
But New York traders ran out of energy Tuesday and turned sellers after data showed February job openings at US companies fell to their lowest level since May 2021 and below forecasts.
While figures showing a strong labour market have been welcomed as giving the Fed room to stop hiking rates, analysts said the reading was also seen as a warning that the economy was on the slide.
"The bears are feeling confident that the recent rally can't keep going given valuations and how the rates markets are clearly signalling we are recession bound," said OANDA's Edward Moya.
"The bulls see a weakening economy and the end of the Fed's tightening cycle.
"The bears most likely have a stronger argument, as if we see rate cuts in the fall, that means something is really wrong with the economy. For the bulls to be right, somehow a soft landing has to emerge."
In Asian trade, Tokyo led losses by shedding more than one percent, with a strong yen adding to the downward pressure. Sydney, Bangkok and Jakarta also fell while Singapore, Mumbai, Seoul, Manila and Wellington rose.
Hong Kong and mainland Chinese markets were closed for a holiday.
- Rates warning -
The price of gold, considered a safe haven in times of uncertainty, extended gains after breaking $2,000 Tuesday for the first time in a year and was pushing towards a new record.
Fed Cleveland boss Loretta Mester warned that rates needed to go above the current five percent for the bank to get control of inflation.
That message came despite worries about the banking sector, which saw two US lenders go under because of surging borrowing costs.
"Precisely how much higher the federal funds rate will need to go from here and for how long policy will need to remain restrictive will depend on how much inflation and inflation expectations are moving down," she said at an event in New York in prepared remarks.
"And that will depend on how much demand is slowing, supply challenges are being resolved, and price pressures are easing."
Traders were jarred by JPMorgan Chase chief Jamie Dimon's warning that the banking crisis "is not yet over" and that inflation could linger at high levels, extending the period of higher interest rates.
Oil prices rose again, building on the week's surge sparked by the output cut, with both contracts now up around seven percent since Friday's close.
- Key figures around 0720 GMT -
Tokyo - Nikkei 225: DOWN 1.7 percent at 27,813.26 (close)
Hong Kong - Hang Seng Index: Closed for holiday
Shanghai - Composite: Closed for holiday
Euro/dollar: DOWN at $1.0955 from $1.0963 on Tuesday
Pound/dollar: DOWN at $1.2490 from $1.2498
Euro/pound: UP at 87.72 pence at 87.65 pence
Dollar/yen: DOWN at 131.54 yen from 131.65 yen
West Texas Intermediate: UP 0.4 percent at $81.04 per barrel
Brent North Sea crude: UP 0.5 percent at $85.33 per barrel
New York - Dow: DOWN 0.6 percent at 33,402.38 (close)
London - FTSE 100: DOWN 0.5 percent at 7,634.52 (close)
-- Bloomberg News contributed to this story --
dan/qan
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