0643 GMT January 16, 2022
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.3 percent with Australian shares off 0.1 percent and South Korea easing 0.3 percent. Japan's Nikkei faltered 0.7 percent, Reuters reported.
Chinese shares opened in the red with the blue-chip CSI300 index down 0.1 percent.
Monday's losses follow a strong rally in global equities since late March, fuelled by central bank and fiscal stimulus and optimism as countries gradually lifted restrictions put in place to curb the spread of the novel coronavirus.
"Any new outbreak will be looked at very, very cautiously by investors. The market is putting into perspective that the COVID-19 issue has not been resolved yet. It's a reality check," said James McGlew, analyst at stockbroker Argonaut.
McGlew expects a further correction "as markets quantify what lies ahead of us."
The lead from Wall Street was also dour with e-minis for the S&P500 sinking 1.1 percent in early Asian trading.
Risk sentiment took a knock after Beijing recorded dozens of new COVID-19 cases in recent days, all linked to a major wholesale food market. Authorities have closed the center and locked down nearby housing districts.
Investors are also fretting over a spike in cases in the United States where more than 25,000 new cases were reported on Saturday.
Worldwide coronavirus cases have crossed 7.86 million with 430,501 deaths, according to a Reuters tally.
Economic data from China did little to revive risk appetite.
China's industrial output rose 4.4 percent in May from a year ago when analysts had forecast a gain of 5.0 percent while retail sales fell a larger-than-expected 2.8 percent in a sign of weak domestic demand.
The Chinese yuan extended losses in offshore trade after the data to be last at 7.0883 per dollar.
Some analysts were still hopeful of a revival in sentiment.
"We assume that any second wave is likely to be more manageable than the first given earlier policy experience," analysts at Morgan Stanley wrote in a note.
"Policy easing will also help Asia (excluding Japan) get back on its feet better."
The risk-sensitive currencies of Australia and New Zealand sold off with both down 0.4 percent at $0.6855 and $0.6424, respectively.
Elsewhere, the safe haven Japanese yen rose on the greenback to 107.18 yen.
Analysts said further tests awaited global markets this week — in particular whether re-opening hopes could still push equities higher.
Federal Reserve Chairman Jerome Powell is also due to testify before Congress where "he may try to spin a more upbeat/hopeful outlook — but whether markets listen remains to be seen," said Betashares chief economist David Bassanese.
Also of interest is US May retail sales figures on Tuesday, which are expected to bounce smartly after a slump in April.
In commodities, oil extended losses after posting its first weekly loss since late April. Brent crude was last down 2.25 percent at $37.86 a barrel while US crude fell 3.09 percent to $35.14.
Oil investors await OPEC+ committee meetings of experts later this week who will advise the producer group and its allies on output cuts.
Gold rose 0.2 percent to $1,732.2 an ounce on safe haven demand.