Asian markets fell Friday on lingering recession worries as data indicated the US economy was slowing down, while Federal Reserve officials pressed their case for further interest rate hikes to battle stubborn inflation.
The losses tracked a sell-off on Wall Street, where tech firms took a hit from bets on further monetary tightening and carmakers tumbled due to concerns about a possible price war.
Investors were also spooked by earnings reports from US regional banks that pointed to a weakening profit outlook following sector turmoil last month that saw three lenders collapse.
Figures showing recurring unemployment benefit claims to hit their highest level since November 2021 combined with an increase in new applications for jobless insurance pointed to a softening labour market.
That came with the news that the closely watched Philadelphia Fed Manufacturing Index fell more than expected and stood in contrast to a surprise surge in the New York Empire Fed Survey on Monday.
The readings indicated the world's top economy was beginning to feel the weight of a year-long rate hike campaign by the Fed.
But while that suggests inflation could come down, there is a worry that a recession is coming.
"The trend higher in jobless claims clearly shows a slowing in the labour market and plays to views of a US recession in 2023," said National Australian Bank's Tapas Strickland.
And Edward Moya at OANDA said jobless claims "will soon see new cycle highs as corporate America has steadily announced more layoffs". But he added that "the lag in when the layoffs will happen will keep wage pressures strong throughout the next few months".
All three main indexes on Wall Street ended in the red, and Asia followed.
Tokyo, Hong Kong, Shanghai, Sydney, Seoul, Singapore, Wellington and Taipei all fell.
While traders are keeping close tabs on the release of corporate earnings, their attention is turning to next month's Fed rate decision.
The broad expectation is for another 25-basis-point hike, but debate surrounds whether the Fed will lift again in June or decide to pause, particularly in light of last month's banking scare, which was widely seen as a result of the tightening.
On Thursday, Philadelphia Fed chief Patrick Harker said in prepared remarks that "some additional tightening may be needed to ensure the policy is restrictive enough" to support the Fed's dual mandate of keeping both unemployment and inflation low.
"Once we reach that point, which should happen this year, I expect that we will hold rates in place and let monetary policy do its work," he said.
His comments were in line with those of New York Fed President John Williams and Fed Governor Christopher Waller.
Harker said he did not expect inflation to come down to the bank's two per cent target until 2025.
Cleveland Fed boss Loretta Mester, meanwhile, signalled support for another hike.
"If the Fed stays the course, broad financial conditions should continue to tighten, the economy should decelerate into recession, and stocks should trade down sharply," Chris Senyek at Wolfe Research said.
"On the flip side, the biggest upside risk to our bearish call remains the Fed backing off way too soon. Although, if the Fed fails to sustainably bring down inflation, the ultimate pain will likely be much worse 12-24 months down the road."
Key figures around 0245 GMT
Tokyo - Nikkei 225: DOWN 0.1 per cent at 28,638.24 (break)
Hong Kong - Hang Seng Index: DOWN 0.3 per cent at 20,345.41
Shanghai - Composite: DOWN 0.2 per cent at 3,359.93
Euro/dollar: DOWN at $1.0969 from $1.0972 on Thursday
Pound/dollar: DOWN at $1.2440 from $1.2442
Dollar/yen: DOWN at 134.08 yen from 134.24 yen
Euro/pound: UP at 88.17 pence from 88.15 pence
West Texas Intermediate: DOWN 0.1 per cent at $77.27 per barrel
Brent North Sea crude: DOWN 0.2 per cent at $80.98 per barrel
New York - Dow: DOWN 0.3 per cent at 33,786.62 (close)
London - FTSE 100: UP 0.1 per cent at 7,902.61 (close)