Asian markets mostly retreated Wednesday following losses on Wall Street, with Tokyo also hurt by a disappointing reading of Japanese business confidence.
But Hong Kong and Shanghai climbed on figures showing a rebound in Chinese manufacturing activity.
After a strong performance for global equities this year, analysts have warned of a rocky road ahead in the near term, with Greece`s debt crisis still unresolved, volatility in oil prices and uncertainty over US interest rates.
Tokyo tumbled 0.90 percent, or 172.15 points, to finish at 19,034.84, Seoul closed 0.62 percent lower, giving back 12.58 points to end at 2,028.45 and Sydney fell 0.52 percent or 30.71 points to 5,860.8.
However, Shanghai surged 1.66 percent, or 62.39 points, to 3,810.29 -- its highest close since March 17, 2008. And Hong Kong added 0.73 percent, or 181.86 points, to 25,082.75.
After an impressive three months that saw big gains in some markets -- including a 10 percent rise in Tokyo and eight percent in Sydney -- investors took to the sidelines Wednesday as they keep track of various global events.
"This is going to be a tougher quarter and you can expect higher volatility," Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors, told Bloomberg News.
Close attention is being paid to Greece, where the anti-austerity government is trying to hammer out new terms for its multi-billion-dollar bailout.
However, it is struggling to come up with proposals that will satisfy its creditors, chiefly paymaster Germany, and release much-needed cash to help it avoid a default and a likely exit from the eurozone.
In New York Tuesday the Dow sank 1.11 percent, the S&P 500 fell 0.88 percent and the Nasdaq dropped 0.94 percent.Adding to uncertainty on Wednesday was Japan`s closely watched Tankan survey of business confidence, which came in below expectations, highlighting the fragility in the world`s number three economy.
The survey of more than 10,000 companies -- marking the difference between the percentage of firms that are optimistic and those that see conditions as unfavourable -- is the most comprehensive indicator of how Japan Inc. is faring.
"The Tankan showed that firms, particularly manufacturers, are now acutely aware that overseas demand is softening," said a report by SMBC Nikko Securities.
In forex trade the dollar slipped to 119.88 yen from 120.06 yen in New York, where it had been given a boost by positive US consumer confidence figures.
The euro bought $1.0753 and 129.00 yen compared with $1.0741 and 128.95 yen.
Hong Kong and Shanghai bucked the regional trend after China said its official Purchasing Managers` Index came in at 50.1 last month, the first result since December above the 50-level that separates expansion and contraction.
The figure will come as welcome news after a string of weak data that have reinforced concerns about a slowdown in the Chinese economy and led to two interest rate cuts by the central bank.
"After a string of disappointing data, the improvement... suggests that the recent rate cuts and pick-up in bank lending growth may be helping to support large firms," Julian Evans-Pritchard, China economist at Capital Economics, wrote in reaction to the data.
Oil prices edged lower. US benchmark West Texas Intermediate eased 36 cents to $47.24 while Brent fell five cents to $55.06.
