January's rally has come to a halt this month as investors contemplate an extended period of high borrowing costs aimed at bringing down inflation from multi-decade highs.
While there are signs that price rises are slowing, and the Federal Reserve acknowledged progress in its battle last week, the employment data Friday was seen as a body blow for many.
The reading, which showed more than half a million new posts created in January, led to speculation the Fed could have to unveil even more rate hikes this year, while any chance of a cut before 2024 all but evaporated.
Focus is now on a planned speech later in the day by central bank boss Jerome Powell, with observers looking for any change from his less hawkish comments after last week's policy decision.
"Powell remains a big wild card every time he speaks," said Chris Senyek at Wolfe Research. "Investors will be looking to see if he 'walks back' his very dovish tone from last Wednesday, particularly with respect to financial conditions and the US 'disinflationary process'. We still believe that the Fed will be 'higher for longer'."
Atlanta Fed president Raphael Bostic warned Monday that if the economy continues to show strength, "it'll probably mean we have to do a little more work".
He told Bloomberg News: "I would expect that that would translate into us raising interest rates more than I have projected right now."
He said he had seen rates topping out at 5.1 percent but added that the final figure could be even higher.
- Bounce for Adani -
All three main indexes on Wall Street ended in the red again, and while Asia enjoyed a bright start traders were unable to maintain the strong momentum.
Hong Kong, Shanghai, Seoul, Taipei, Bangkok and Jakarta rose but their early strength was sapped as the day went on.
London and Paris rose at the open but Frankfurt dipped.
Tokyo was flat, while Singapore, Wellington and Manila fell.
Sydney was in the red as the Australian central bank hiked interest rates to a 10-year high and warned of more to come as it struggles to get a hold on inflation.
Mumbai was also on the back foot though shares in tycoon Gautam Adani's troubled empire soared following news it had moved to pay back loans of $1.1 billion after allegations of accounting fraud wiped more than $100 billion off the group's market value.
Adani Enterprises jumped as much as 25 percent before trading was suspended. They then pared some of those gains when they restarted.
Observers were also keeping tabs on developments after the United States shot down a suspected Chinese spy balloon that had been floating over the country for several days.
Officials are recovering debris from the Atlantic for analysis by intelligence experts and there is no plan to give the remains back to Beijing, officials said Monday.
China, however, has hit out at the move, saying the balloon was an errant weather observation aircraft with no military purpose.
The incident dealt a blow to already tense relations, with Secretary of State Antony Blinken on Friday scrapping a planned rare trip to Beijing designed to contain rising tensions.
"Much of Wall Street is getting nervous over US-China tensions," said OANDA's Edward Moya.
"A few months ago, China was not investable. China was becoming a favorite bet with the great reopening, but now rising tensions and possible blacklisting, investors are heading to the sidelines."
- Key figures around 0820 GMT -
Tokyo - Nikkei 225: FLAT at 27,685.47 (close)
Hong Kong - Hang Seng Index: UP 0.4 percent at 21,298.70 (close)
Shanghai - Composite: UP 0.3 percent at 3,248.09 (close)
London - FTSE 100: UP 0.2 percent at 7,850.92
Dollar/yen: DOWN at 132.26 yen from 132.65 yen on Monday
Euro/dollar: DOWN at $1.0703 from $1.0728
Pound/dollar: DOWN at $1.1987 from $1.2020
Euro/pound: UP at 89.27 pence from 89.22 pence
West Texas Intermediate: UP 2.2 percent at $75.78 per barrel
Brent North Sea crude: UP 2.1 percent at $82.70 per barrel
New York - Dow: DOWN 0.1 percent at 33,891.02 (close)
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