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Tokyo - Asian stock markets fell in thin trading on Tuesday, extending losses on US and European markets as a stubbornly strong yen dragged Tokyo into the red while falling oil prices deflated energy shares.
With few fresh catalysts to drive deals, investors were eyeing the start of a Group of Seven summit in Japan on Thursday, as US President Barack Obama and other leaders from the club of rich nations meet for annual talks.
Shares of oil-linked firms slumped in early trading after crude dipped for a second day as comments from Iranian officials vowing to keep production up did little to dispel worries about global oversupply.
In early deals, US benchmark West Texas Intermediate for July delivery was down 14 cents at $47.94 a barrel while Brent crude for July slipped 19 cents to $48.16.
By the break in Tokyo, Japanese energy explorer Inpex was more than one percent lower while refiner JX Holdings was down 0.5%.
The benchmark Nikkei index fell 0.7% as a stubbornly strong yen clouds the outlook for Japanese exporters' profits.
Hong Kong's Hang Seng index dropped 0.1%, Shanghai was 0.9% lower, Seoul fell 0.6%, and Sydney edged down 0.2%.
Sentiment also took a hit from worries over a possible US interest rate hike by the Federal Reserve as early as next month, analysts said.
Global growth fears
Adding to the US central bank's hawkish signals last week that a June US rate raise could be on the cards, a prominent Fed board member weighed in with comments that suggested markets could be behind the curve on the Fed's intentions.
Since raising rates in December for the first time in nine years, the US central bank in March forecast essentially two rate rises for this year, but markets have had much lower expectations amid a batch of lacklustre US economic data.
However, James Bullard, president of the St. Louis Fed and a voting member of the policy-setting Federal Open Market Committee, said in a speech on Monday in Beijing that US labour market and inflation data suggested the Fed's projection "may be more nearly correct".
"Markets remain fragile as talk of a US interest rate hike in June puts some fear on whether global growth will remain resilient," Niv Dagan, Melbourne-based executive director at Peak Asset Management, told Bloomberg News.
"The timing of future Fed rate hikes in the face of a sluggish economy is a major focus among stock investors who have benefited from historically low borrowing costs since the 2008 financial crisis."
Adding to fears of slowing global growth were figures on Monday showing Japan's exports faltered in April - after separate figures last week showed the world's number three economy dodged a recession in the first quarter.
The sputtering global economy will be a key topic on the agenda at the two-day G7 talks.
On currency markets, the greenback bought ¥109.40 on Tuesday, slightly up from New York but still well down from ¥109.84 in Tokyo earlier on Monday.
