Stocks wobbled and bonds fell in Asia, while the dollar rose on Tuesday after a hot inflation reading in Germany heightened nerves about the pace and scale of looming interest rate hikes.
Rising energy prices added to worry about the persistence of consumer pain. Brent crude futures touched a two-month top of $122.43 a barrel after the European Union vowed to slash imports of Russian oil by year's end.
US treasuries slumped on return from Monday's US holiday, sending the yield of the 10-year bond up nearly 10 basis points (bps) to 2.8405%.
German bund yields rose 8.1 bps overnight after German consumer prices increased at their fastest pace in half a century, strengthening the case for an outsized European Central Bank interest rate hike in July.
Eurozone inflation data is due later on Tuesday.
Chinese Purchasing Managers' Index (PMI) figures showed another month of contraction in services and manufacturing activity, though at a reduced pace of decline.
In equities, S&P 500 futures gave up early gains to fall back to flat early in the Asian session, and Nasdaq 100 futures were up 0.4%. MSCI's broadest index of Asia-Pacific shares outside Japan snapped a two-day winning streak and dropped 0.2%. Japan's Nikkei fell 0.1%.
"The focus now is really on the US economy and China," said Khoon Goh, head of Asia research at ANZ Bank in Singapore.
"The two largest economies in the world are slowing, for different reasons, and it's not great for the global growth trajectory."
Factory output in the third-largest economy, Japan, also dropped sharply in April as Chinese demand withered, data on Tuesday showed.
May figures showed China's official PMI at 49.6, indicating a contraction in factory activity but at a slower pace than in April, when the figure was 47.4.
Growth concerns have put the brakes on a two-week rally for exporters' currencies globally and have steadied the US dollar as investors have again leaned towards safety.
Hawkish remarks from US Federal Reserve Governor Christopher Waller also wound back recent expectations that the Fed might pause for breath after hikes in June and July.
"I am advocating 50 (basis point hikes) on the table every meeting until we see substantial reductions in inflation. Until we get that, I don't see the point of stopping," Waller said.
Fed Funds futures fell sharply, especially contracts for the early months of next year, as investors braced for relentless interest rate rises that would push the benchmark rate towards 3% by mid-2023.
The dollar traded on Tuesday at $1.0744 per euro, up 0.3%, and 128.16 yen, about 0.4% higher.
The trade-sensitive Australian and New Zealand dollars fell, with the Aussie last down 0.2% at $0.7180 and the kiwi down 0.4% at $0.6530.
Oil prices rose after the European Union agreed to slash oil imports from Russia by the end of 2022.
US crude futures rose to $117.70 a barrel.
The stronger dollar pushed spot gold a fraction lower to $1,848 an ounce. Bitcoin rallied hard overnight, jumping nearly 8% and topping $32,000 for the first time in three weeks. It sat just below there at $31,540 early in the Asian session.