HONG KONG Reuters -- Asian stocks fell on Wednesday as investors failed to find a cheer in strong U.S. economic data and looked at what it might mean for a hawkish Federal Reserve, with a surging dollar weighing heavily on regional currencies.
After Wall Street's losses, MSCI's broadest index of Asia-Pacific shares outside Japan fell by 1.5% in early trading, while Japan's benchmark Nikkei average opened down 1.12%.
Fixed-income markets were under heavy pressure with the U.S. 10 year Treasury yields rising to 3.365% on Wednesday, the highest since June 16.
Data showed the U.S services industry picked up for the second straight month in August, due to stronger order growth and employment.
The U.S. central bank would not slow down the pace of interest rate hikes, as it reinforced its belief that the economy was not in recession.
The good news for the real economy has now become bad news for the market - both for the bond and the stock market, said Redmond Wong, Hong Kong-based Market Strategist of Greater China at Saxo Capital Markets.
He said that the hope of the Fed may consider a soft landing with slower rate hikes would be vanished because of weaker than expected jobs data last week, but he said that hope disappeared again on the new set of numbers.
Investors we talked to have lost a bit of confidence in the stock market, Wong said.
Australia's S&P ASX 200 lost 1.29%. The second quarter of this year saw its economic growth pick up speed, giving hope that activity can weather higher interest rates and cost-of-living pressures.
The Hong Kong stock fell by 1.35%, with its main tech index losing 1.9%.
The benchmark fell 0.11% on concerns over new COVID restrictions on large mainland cities such as Guiyang after a full lock down of the southwest city of Chengdu.
Asian currencies fell against the dollar due to the surge in the U.S. bond yields.
Chinese authorities have already signaled concerns about the currency's aggressive declines.
Crude oil prices fell on weaker consumption forecasts, despite weaker consumption forecasts in energy markets. U.S. crude fell 1.22% to $85.8 per barrel, and Brent was down 1% on the day.