US tariffs, China data and politics in focus
The Nikkei 225 fell 0.87 percent, or 190.81 points, to finish at 21,777.29. The broader Topix slipped 0.45 percent, with most sectors trading in negative territory. Of note, the Topix iron and steel index firmed by 0.08 percent after edging lower in the last session.
Some defense-related stocks also gained ground despite broader losses on the index, with Ishikawa Seisaku, a manufacturer of defense equipment, surging 7.04 percent.
Over in Seoul, the benchmark Kospi edged down by 0.34 percent to end at 2,486.08. Automakers carved out gains that were offset by losses in other sectors, including downbeat manufacturing plays. Technology names traded mixed, with Samsung SDI gaining 2.23 percent.
Mainland markets came under pressure despite the release of stronger-than-expected data, which saw industrial output and fixed asset investment topping forecasts. The Shanghai composite edged down by 0.57 percent to close at 3,291.26 and the smaller Shenzhen composite lost 0.89 percent to end at 1,878.51.
Overnight news that the Trump administration was looking into a tough trade package against China likely weighed on markets. The package could include indefinite tariffs and investment restrictions. Trump could impose tariffs on $60 billion of Chinese goods, Reuters reported, citing a source.
"[T]he real danger is recalcitrant mercantilist instincts descending into trade wars," Vishnu Varathan, head of economics and strategy at Mizuho Bank, said. He added that unintended consequences could result in "unnecessary global trade pain."
In Sydney, the ASX/S&P 200 lost 0.66 percent to end at 5,935.30, with moderate gains in mining majors Rio Tinto and BHP unable to lift the broader index. Sector-wise, losses were broad-based, with all sectors except gold producers in the red. Financials, which make up the most heavily weighted sector on the index, declined 0.84 percent by the end of the day.
"Global risk appetite may continue to wane on the back of U.S. President Trump's latest reshuffle to suddenly oust Tillerson," OCBC Treasury Research analysts said in a note.
"The instability of the White House staff reinforced market uncertainty about Trump's future policy moves, especially on trade."
CIA Director Mike Pompeo will be taking on the role.
"[Tillerson's] departure has left some worrying that it provides a green light to those in office pushing for more protectionist measures," said ANZ Research analysts in an early morning note.
Stocks stateside had initially traded higher early in the session after the release of inflation data. Consumer prices rose 0.2 percent last month, meeting forecasts and easing concerns about tighter monetary policy due to inflationary pressures.
Meanwhile, data released on Wednesday showed Japan core machinery orders, a volatile metric, for January rose 8.2 percent on month and 2.9 percent on year, beating forecasts, Reuters reported. The Topix machinery index was down 0.75 percent, with Komatsu lower by 1.51 percent.
In corporate news, embattled commodities firm Noble Group on Wednesday announced it had secured a binding restructuring support agreement with creditors representing 46 percent of its debt. Shares of the company were up 6.45 percent by 3:11 p.m. HK/SIN.
The dollar index, which tracks the greenback against a basket of six rivals, was mostly flat at 89.665 at 3:02 p.m. HK/SIN. The dollar eased against the yen to trade at 106.53 after trading as high as 106.74 earlier in the session.
While Bank of Japan policymakers thought it was appropriate for the central bank to "persistently pursue powerful monetary easing," some members said it was important to monitor side effects of current policy, according to minutes of the BOJ's January meeting.
The Australian dollar traded at $0.7876, firming from levels around the $0.786 handle after the release of strong China data.
— CNBC's Eamon Javers and Kevin Brueninger contributed to this report.
European stocks erase gains, tracking U.S. lower on trade war concerns
Stocks in Europe had traded higher earlier in the day, buoyed after European Central Bank President Mario Draghi said its bond-buying program will likely continue if underlying inflation in the region remains subdued.
Meanwhile, investors were also sifting through more corporate updates, including one from Adidas AG that sent shares of the German sports gear maker flying higher by double digits.
How markets are movingThe Stoxx Europe 600 index SXXP, -0.15% fell 0.2% to close at 374.94, after trading as high as 377.71 earlier in the day.
France’s CAC 40 index PX1, -0.18% ended 0.2% lower at 5,233.36, while the U.K.’s FTSE 100 index UKX, -0.09% fell 0.1% to 7,132.69.
Germany’s DAX 30 DAX, +0.14% rose 0.1% to 12,237.74, lifted by Adidas.
The euro EURUSD, -0.1211% bought $1.2370, down from $1.2392 late Tuesday in New York.
What’s driving marketsEuropean stocks started to erase gains in the afternoon and turned lower as U.S. markets suffered sharp losses. The downbeat mood stateside came as traders fretted that President Donald Trump’s tariffs on steel and aluminum tariffs could spark a trade war, with the New York Times writing that manufacturing stalwart Boeing Co. BA, -1.73% could be among companies particularly hurt.
Regional indexes in Europe had traded higher earlier in the day as the euro pulled back during a speech by ECB President Mario Draghi at conference in Frankfurt. He did say the eurozone economy has been strengthening more than it had anticipated.
However, “there is a very clear condition for us to bring net asset purchases to an end: we need to see a sustained adjustment in the path of inflation toward our aim, which is a headline inflation rate of below, but close to 2% over the medium term,” he said, adding that “the performance of underlying inflation remains subdued compared with previous recoveries.”
The euro declined as soft inflationary pressures would likely keep the European Central Bank from raising interest rates in the foreseeable future. “The key issues we need to examine are wage dynamics, their pass-through to prices, and the possible risks to the inflation outlook,” said Draghi.
A weaker euro can help bolster shares of European exporters as it makes their goods and services less expensive to purchase for overseas buyers. The euro on Tuesday leapt above $1.24 for the first time since March 8 after an expected reading of U.S. consumer prices February tamped down concerns that the Federal Reserve will raise interest rates four times in 2018 instead of three as previously expected.
The eurozone’s final reading of consumer price inflation for February is scheduled for release on Friday.
What strategists are saying“The positive mood in Europe has waned after U.S. markets turned lower. Equity benchmarks pushed higher this morning, but have faded toward the close as investors take their cues from their American counterparts,” said David Madden, market analyst at CMC Markets, in a note.
“Growing fears of a trade war is weighing on U.S. stocks, and indices like the Dow Jones are losing ground quickly. Dealers are fearful that China will react to President Trump’s tariffs by imposing levies on the aerospace industry, and Boeing shares have taken a hit,” he added.
Stocks in focusAdidas AG shares ADS, +9.29% jumped 11% for the Stoxx Europe 600’s biggest gain after the sporting goods company upgraded its long-term profitability target even as its posted a fourth-quarter net loss due to a one-off negative tax effect. Adidas will also propose lifting its dividend of €2.60 a share and that it will initiate share buyback program of up to €3 billion.
Shares in Inditex SA ITX, +3.83% rose 3.8% as the parent company for apparel retailer Zara said sales in stores that have been open for a year or more rose 5%. The rise, however, was a marked slowdown from the 10% growth reported the previous period.
Prudential PLC PRU, +5.07% climbed 5.1% after the financial services company saying it will demerge M&G Prudential. Following that move, M&G Prudential will be an independent provider of savings and investment services.
Shares in Bpost BPOST, -22.02% tumbled 22% for the Stoxx 600’s biggest drop after the Belgian postal-services company forecast 2018 core earnings of 560 million euros ($693 million) to 600 million euros. That was below a Thomson Reuters consensus estimate of 637 million euros.
Dow closes more than 200 points lower, as Boeing slides on fears of a China trade war
The 30-stock index lost 248.91 points at 24,758.12 after opening up more than 100 points. Boeing dropped 2.5 percent, contributing the most to the Dow's decline. The Dow fell as much as 338 points earlier in the session.
Boeing's decline comes after a report said President Donald Trump wishes to slap $60 billion of tariffs on Chinese goods. Investors feared China could target the aerospace giant in retaliation.
The S&P 500 closed 0.6 percent lower at 2,749.48 amid weak performances in materials, financials and consumer staples companies. The index also dipped below its 50-day moving average, a key technical level.
"The technical undercurrent of the market persists and in the event we close beneath the 50-day moving average," said Jeff Kilburg, CEO of KKM Financial. "In the event we close beneath the 50 day moving average, the conviction of the recent longs will be tested."
Utilities stocks jumped, with the Utilities Select Sector SPDR Fund (XLU) climbing 1 percent. The fund also posted its first five-day winning streak since late November.
The Nasdaq composite slipped 0.2 percent at 7,496.81 as shares of Apple declined 0.9 percent.
A source told CNBC on Tuesday that Washington is contemplating a trade package that would include investment restrictions, indefinite tariffs and potentially even visa restrictions on Chinese travelers.
Trump tweeted on Wednesday: "We cannot keep a blind eye to the rampant unfair trade practices against our Country!"
Last week, Trump signed two declarations to impose tariffs on steel and aluminum imports — both are expected to take effect in the coming weeks. While Canada and Mexico are exempt from the deal, fears over a potential trade war remain, as investors worry that countries around the world may impose their own retaliatory tariffs.
Stocks came off their lows after CNBC reported that Trump is planning to name CNBC contributor Larry Kudlow as the next director of the National Economic Council. Boeing shares also rebounded following the news.
The moves Wednesday come after a choppy trading day Tuesday, with the Dow closing down more than 150 points, the index's worst session since March 1. Tech shares helped lead the declines, with the sector dropping more than 1 percent.
"Certainly the stock market is being supported by the economy and earnings being in double digits this year," said Bruce Bittles, chief investment strategist at Baird. "I'd say the one problem area is the technical situation and that the rally is getting more narrow ... That would suggest we may have another retest of the February lows before this is all over."
But as for political news on trade and a possible trade war, Bittles said that those worries are likely "overstated."
In economic news, the Commerce Department said retail sales declined for a third straight month as households curbed purchases of cars and other expensive items. Economists had been expecting sales to rise 0.3 percent. The SPDR S&P Retail ETF (XRT) fell 0.6 percent.
Meanwhile, U.S. producer prices increased slightly more than expected in February. The Department of Labor said on Wednesday that its producer price index rose 0.2 percent last month; economists polled by Reuters had expected PPI gaining 0.1 percent.
So-called core PPI — which excludes volatile food, energy and trade service prices — rose 0.4 percent.
"It's kind of a mixed bag. You've got retail sales missing expectations and PPI and business inventories coming in line," said Randy Frederick, vice president of trading and derivatives at Charles Schwab. "We seem to be in a consolidation phase this week."
In corporate news, Ford Motor Company's stock gained 2.2 percent after Morgan Stanley upgraded the company to overweight from underweight. The bank sees more potential in the American motor vehicle company following "significant changes" to senior management at the company and its efforts to improve its global portfolio.
Shares of Qualcomm closed 0.7 percent higher in choppy trade after Broadcom announced that it is formally ending its hostile bid for the American chipmaker. Qualcomm stock fell nearly 5 percent Tuesday after Trump ordered Broadcom to abandon the deal.
Yields on 10-year Treasurys fell to 2.817 percent Wednesday in New York, their lowest level since early March. Yields move inversely to prices.
—CNBC's Gina Francolla contributed to this report.