Oil prices
Oil prices extended gains on geopolitical concerns and ahead of a meeting of major producers AFP

Asian markets fell Tuesday as traders were spooked by signs of weakness in the US economy, even as the data boosted hopes the Federal Reserve will cut interest rates this year.

The losses came as energy firms were weighed by a further drop in oil that came after OPEC and other major producers said they would begin lifting output before the year's end, calling time on a period of cuts that has kept crude elevated.

Investors have shifted nervously in recent weeks on concerns that the Fed will not cut rates until 2025 as inflation remains stubbornly above target and decision-makers warned against moving too early, insisting on seeing more evidence prices are under control.

On Monday, the Institute for Supply Management (ISM) released its manufacturing index showing US activity contracted for a second successive month in May.

The figures indicated that businesses were struggling with elevated interest rates and weak consumer spending, among other things.

"The manufacturing ISM data reaffirmed several prevailing economic trends: decelerating inflation, slowing growth, and a tight labour market," Gary Pzegeo, of CIBC Private Wealth US, said.

"We should see higher odds of a rate cut later this year priced into interest rate futures," he added.

While traders have of late taken soft economic data as a positive sign, owing to the fact it gives the Fed room to cut rates, the latest news stoked concerns about the outlook for the economy.

BMO Capital Markets' Ian Lyngen and Vail Hartman added that "investors are on guard for indications that the downside trajectory is accelerating".

Focus is now on the release of closely watched non-farm payrolls figures that are due out on Friday and will provide a fresh snapshot of the labour market and economy.

Wall Street's three main indexes diverged, with the Nasdaq and S&P 500 supported by Big Tech.

But Asia stumbled, with Tokyo, Shanghai, Sydney, Seoul, Singapore, Taipei and Wellington all in negative territory. However, Hong Kong reversed an early loss to edge up, while Manila also advanced.

Oil prices extended the losses of more than three percent racked up Monday after OPEC said it would begin lifting output later in the year and through 2025, after an extended period of cuts.

The news came as investors were already fretting over China's ongoing economic troubles and figures showing demand in the United States appeared to be thinning.

"OPEC+ has a history of surprising the market, and this time was no different as the group unveiled a roadmap to start raising output in 2025," said HSBC strategists in a commentary.

"How OPEC+ unwinds its multiple, complex set of cuts... remains one of the biggest questions for the oil market.

"In our view, the agreement provides some clarity for the next 19 months, but questions remain including how remaining cuts will be unwound beyond end-2025."

Tokyo - Nikkei 225: DOWN 0.5 percent at 38,749.25 (break)

Hong Kong - Hang Seng Index: UP 0.3 percent at 18,460.50

Shanghai - Composite: DOWN 0.3 percent at 3,067.81

Dollar/yen: UP at 156.41 from 156.21 yen on Monday

Euro/dollar: UP at $1.0906 from $1.0903

Pound/dollar: UP at $1.2805 from $1.2802

Euro/pound: UP at 85.17 from 85.14 pence

West Texas Intermediate: DOWN 0.6 percent at $73.75 per barrel

Brent North Sea Crude: DOWN 0.6 percent at $77.93 per barrel

New York - S&P 500: UP 0.1 percent at 5,283.40 (close)

London - FTSE 100: DOWN 0.2 percent at 8,262.75 (close)