Sydney: Asian markets were in hesitant mood on Tuesday as investors wondered what China's response would be to civil unrest in Hong Kong, while the U.S. dollar was on track to post its biggest monthly gain in well over a year.
Tens of thousands of pro-democracy protesters blocked Hong Kong streets in the early hours on Tuesday, in one of the biggest political challenges to Beijing since the Tiananmen Square crackdown 25 years ago.
The unrest was an added complication for investors amid long-standing concerns about the health of China's economy.
The HSBC survey of manufacturing (PMI) for September is due out later Tuesday and is expected to show a final reading around 50.5, up from 50.2 in August.
The official version of the PMI is due on Wednesday and analysts look for a steady outcome around 51.0.
MSCI's broadest index of Asia-Pacific shares outside Japan lost another 0.1 percent having fallen sharply on Monday. Hong Kong's Hang Seng Index had shed 1.9 percent on Monday to its lowest close since July 9.
The latest data out of Japan were so mixed that they offered little clarity about the actual state of the economy. The figures suggested unemployment declined in August and retail sales rebounded, but that household spending and industrial output had both fallen sharply in the month.
The broad Topix index retreated 0.8 percent and away from six-year highs, while the Nikkei fell 0.9 percent.
Worryingly South Korea also reported a steep 3.8 percent drop in industrial output in August, far worse than forecast and the biggest fall since the 2008 global financial crisis. [TOP/CEN]
Stocks in Seoul eased 0.1 percent.
Asian markets got no help from Wall Street, where the Dow closed down 0.25 percent on Monday, while the S&P 500 fell 0.25 percent and the Nasdaq 0.14 percent.
Shares of companies exposed to Hong Kong fell, with HSBC down 2.3 percent and luxury goods group Richemont off 1.7 percent.
MSCI's emerging markets index had also been dragged down by big losses in Brazil.
The Brazilian real fell to a near six-year low and the benchmark Bovespa index notched its biggest one-day drop in more than three years after a poll showed President Dilma Rousseff gaining on challenger Marina Silva ahead of Sunday's election. The Bovespa fell 4.5 percent.
Dollar on a roll
The U.S. dollar hovered at a four-year peak against a basket of major currencies and its gains of 3.5 percent so far this month were the largest since February 2013.
The dollar scaled a fresh six-year high of 109.75 yen overnight and last traded at 109.35. The euro came within a whisker of its November 2012 trough of $1.2661 before edging back to $1.2684.
One of the worst-performing major currencies this month was the New Zealand dollar, which is down nearly 7 percent.
Data on Monday confirming the Reserve Bank of New Zealand had intervened to weaken the currency sent it as low as $0.7708, before a marginal bounce to $0.7749.
The stronger U.S. dollar has been a heavy weight on many commodities since it makes them more expensive for buyers using other currencies.
Spot gold was down at $1,216.95 an ounce, not far from last week's trough at $1,206.85.
U.S. crude oil eased back 28 cents to $94.29 a barrel, after managing a modest rally on Monday. Brent was off 8 cents at $97.12 and uncomfortably close to its recent two-year low.
