Oil prices continued to drop after shedding more than 2 percent overnight, as investors doubted that oil producing countries would freeze output to address a global glut.

Brent lost 0.6 percent to $37.48 a barrel after losing 2.5 percent on Monday. U.S. crude lost nearly 3 percent overnight, and on Tuesday was down about 0.8 percent at $35.40.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 1.3 percent. Japan's Nikkei stock index dropped 2.1 percent to six-week lows, as the perceived safe-haven yen rallied.

"Investors are concerned that Japanese companies are losing their 'weak-yen appeal'," said Kazuhiro Takahashi, equity strategist at Daiwa Securities.

"Many people are thinking it would be difficult for exporters to forecast on-year gains in their earnings for this fiscal year."

Commodity-related and industrial shares helped drag down U.S. stock indexes overnight, and U.S. economic data suggested that economic growth remained sluggish in the first quarter.

New orders for manufactured goods dropped in February, as they have for 14 of the past 19 months, while business spending on capital goods was much weaker than initially believed.

That gave investors no reason to believe the U.S. Federal Reserve would raise interest rates anytime soon, in line with the cautious tone Fed chair Janet Yellen sounded last week that contrasted with more hawkish remarks from other central bank policymakers.

Boston Fed Reserve President Eric Rosengren was the latest to fly into the hawkish zone on Monday, calling it "surprising" that futures markets currently price in just one or even no rate hikes this year, which he said could prove "too pessimistic."

"Rosengren is usually on the dovish side of the spectrum, highlighting how out of line Fed chair Yellen sounded last week compared to her colleagues," Sean Callow, senior currency strategist at Westpac, said in a note.

Minneapolis Fed President Neel Kashkari said on Monday he is "comfortable" with the current stance of U.S. monetary policy, and expects "moderate" economic growth ahead.

By contrast, Bank of Japan Governor Haruhiko Kuroda on Tuesday stressed his readiness to expand monetary policy further, saying that market moves would be among key factors the central bank will look at in deciding when and how it will next expand stimulus. But his comments did little to stem the yen's ascent.

The dollar shed about 0.5 percent to 110.84 yen. A slide below 110.67 yen would take the currency to its lowest since October 2014. The euro gave up about 0.4 percent to 126.33 yen.

Against the dollar, the euro edged up about 0.1 percent to $1.1397, within sight of Thursday's 5-1/2 month peak of $1.1438.

The Australian dollar was down about 0.3 percent at $0.7574, as investors awaited the outcome of the Reserve Bank of Australia's latest policy meeting, expected at 0430 GMT.

The RBA is widely expected to keep its cash rate at a record low 2 percent, where it has stood since May last year. Subdued retail sales and inflation data on Monday suggested the central bank might consider cutting rates in the months ahead.

The Reserve Bank of India is expected to cut its policy interest rate by a quarter percentage point on Tuesday, lowering it to a more than five-year low while dangling the prospect of another cut later this year if inflation trends stay benign.

(reuters.com)