Adding to selling pressure were concerns that China had the online gaming sector in its crosshairs next, after a crackdown on its tech, private tuition and property industries last month sparked turmoil.

News that more than 200 million people had now been infected with virus in just over 18 months highlighted the huge battle governments face in bringing the pandemic under control, with the uneven rollout of Covid-19 vaccines raising concerns about the worldwide recovery.

The key headache now is the highly transmissible Delta strain, which is forcing some governments to reimpose lockdowns or other containment measures, blurring the economic outlook.

A major concern is the spike in cases in China, the world's second-biggest economy and major global growth driver, which some economists warn could put a big dent in its annual growth.

US officials on Thursday indicated that the variant's spread could be affecting the jobs market.

Data by payroll services firms showed US private hiring in July came in at 330,000, the weakest since February, while also less than half the previous month and well below expectations.

"The labour market recovery continues to exhibit uneven progress, but progress nonetheless," ADP chief economist Nela Richardson said.

"Bottlenecks in hiring continue to hold back stronger gains, particularly in light of new Covid-19 concerns tied to viral variants."

The figures gave investors reason to think ahead of Friday's government employment report, which some analysts had forecast to show a gain of as much as a million jobs.

They also offset news that activity in the crucial US services sector hit a record high last month thanks to further business reopenings.

- Beijing's crosshairs -

Comments from Fed vice chairman Richard Clarida raised the prospects of the US central bank scaling back its huge bond-buying programme and lifting interest rates as soon as 2023. The ultra-accommodative measures have been a key driver of the rally in global markets from their nadir in March 2020.

He said that as the economy emerges from the pandemic, tapering of the quantitative easing scheme could begin later this year, with analysts tipping a move possibly in November.

The remarks come after a long-running debate about sharp rises in inflation caused by reopenings and people getting back to their daily lives. And while Fed officials have largely said the spikes would be temporary, investors have long thought it will have to tighten policy sooner than expected.

After a soft lead from Wall Street, where the S&P 500 came off a record high, Asia struggled.

Hong Kong led the losses after a report in China's state-backed Securities Times said the government should end tax breaks for gaming companies as they have grown into global firms.

"With these software industries having developed... the government no longer needs to continue providing industry support," it said. "In this regard, the gaming industry should be mentally prepared."

The comments were the latest threat against the multi-billion-dollar industry, days after another mouthpiece called online games "spiritual opium", and added to concerns the industry could be next in Beijing's crosshairs.

"China's online gaming industry is part of the broader tech space, but this is the second government mouthpiece to take a shot at the sector this week, and you ignore the non-too subtle warning at your perils," said OANDA's Jeffrey Halley.

"From IPOs to tech to after-school education, the list of 'targets' seems to get longer every week."

Hong Kong reversed early gains and went into negative territory with Tencent, which has been hammered by Beijing's recent soundings, shedding more than three percent while Netease lost more than four percent.

There were also losses in Shanghai, Singapore, Seoul, Wellington, Taipei, Manila and Bangkok. Tokyo, Sydney, Mumbai and Jakarta rose.

London and Frankfurt fell at the open, though Paris edged up.

Oil prices edged up but struggled to make headway into the previous day's big drops, which came on the back of fears over Chinese demand as it imposes lockdowns and after a surprise jump in US inventories.

Both main contracts have lost around a tenth of their value since hitting multi-year highs at the start of July.

- Key figures around 0810 GMT -

Tokyo - Nikkei 225: UP 0.5 percent at 27,728.12 (close)

Hong Kong - Hang Seng Index: DOWN 0.8 percent at 26,204.69 (close)

Shanghai - Composite: DOWN 0.3 percent at 3,466.55 (close)

London - FTSE 100: DOWN 0.1 percent at 7,119.54

Dollar/yen: UP at 109.58 yen from 109.48 yen at 2100 GMT

Pound/dollar: UP at $1.3917 from $1.3891

Euro/dollar: UP at $1.1845 from $1.1841

Euro/pound: DOWN at 85.11 pence from 85.21 pence

West Texas Intermediate: UP 0.1 percent at $68.23 per barrel

Brent North Sea crude: UP 0.1 percent at $70.46 per barrel

New York - Dow: DOWN 0.9 percent at 34,792.67 (close)

-- Bloomberg News contributed to this story --

dan/qan

Tencent