Japan's Nikkei 225 index lost 0.4% to 21,129.72 and the Kospi in Seoul shed 0.1% to 2,108.75. The Shanghai Composite index declined 0.6% to 2,909.38. Australia's S&P ASX 200 edged less than 0.1% lower to 6,543.70. Shares rose in Taiwan but fell in Jakarta and Thailand.
The Hang Seng lost 1.9% to 27,264.54 as thousands of protesters, most of them youths, prevented lawmakers from entering Hong Kong's government headquarters Wednesday. The demonstrations delayed a legislative debate on a bill that would allow criminal suspects in Hong Kong to be sent for trial in mainland China, a proposal that is sharpening fears over growing Chinese control and an erosion of civil liberties in the semiautonomous territory.
The crowds overflowed onto a major downtown road as they overturned barriers and tussled with police. The proposed legal changes have spooked investors, Stephen Innes of SPI-Asset Management said in a commentary, as it "could have far-reaching consequences for attracting overseas talent and does question the viability of Hong Kong as a leading financial hub, which of course is spooking property investors."
On Wall Street, defense contractors suffered steep declines and technology stocks gave up most of their early gains, taking the steam out of a morning rally. The market had advanced for five straight days since the Federal Reserve signaled it is open to cutting interest rates if needed to stabilize an economy rattled by trade disputes. The gains had erased much of the S&P 500's 6.6% decline in May. But Tuesday, concerns that the U.S. trade spat with China could be prolonged and hurt growth in the world's two biggest economies dimmed investor enthusiasm.
President Donald Trump told reporters Tuesday he expects to meet with Chinese leader Xi Jinping in Osaka at the summit of the Group of 20 major economies. But he said he's prepared to expand 25% tariffs already imposed on $250 billion of Chinese exports to cover another $300 billion if a deal with Beijing falls through.
"It's me, right now, that's holding up the deal," Trump said in comments carried by CNBC and other news outlets. "And we're either going to do a great deal with China or we're not doing a deal at all."
Katie Nixon, chief investment officer at Northern Trust Wealth Management, said there is no clear resolution in sight to the trade war and investors will have to get accustomed to uncertainty hanging over the market.
"The market's going to be really sensitive to trade news," she said. "This is going to be very hard to resolve neatly and quickly." Defense companies were the biggest decliners in the S&P 500. The market on Monday welcomed news of a megamerger between Raytheon and United Technologies, but the stocks dropped sharply Tuesday. Raytheon lost 5.1% and United Technologies shed 4%. L3 Technologies fell 4.4% and Harris Corp. dropped 4.3%. On Monday, Trump expressed some reservations about the Raytheon-United Technologies tie-up.
Technology stocks also gave up some early gains. Adobe fell 1.6% and Advanced Micro Devices fell 2.5%. The tech sector is still up nearly 24% so far this year, the best performer among the 11 sectors in the S&P 500.
Consumer-focused stocks and internet companies were among the gainers. Facebook rose 1.9% and Verizon gained 1.2%. Walgreens rose 1.1% and Dollar Tree rose 2.7%. The S&P 500 slipped 1.01 point, or 0.03%, to 2,885.72. The Dow fell 14.17 points, or 0.1%, to 26,048.51. The Nasdaq composite slipped 0.60 of a point to end at 7,822.57. The Russell 2000 index of small companies fell 4.45 points, or 0.3%, to 1,519.11.
The yield on the 10-year Treasury has dropped from around 2.50% in early May to 2.13% Wednesday. In other trading, benchmark U.S. crude lost 98 cents to $52.29 per barrel in electronic trading on the New York Mercantile Exchange. It rose 1 cent to $53.27 a barrel on Tuesday. Brent crude oil, the international standard, fell $1.03 to $61.26 a barrel.
The dollar fell to 108.30 Japanese yen from 108.52 yen on Friday. The euro rose to $1.1336 from $1.1330.