Cancellation of talks between Pyongyang and Seoul breaks from months of easing relations on the peninsula. In energy markets, crude oil prices remained near recent highs amid concerns US sanctions on Iran may restrict exports from a major producer.

A man walks past an electronic stock board showing Japan's Nikkei 225 index at a securities firm in Tokyo May 15, 2018.
A man walks past an electronic stock board showing Japan's Nikkei 225 index at a securities firm in Tokyo May 15, 2018. (Eugene Hoshiko / AP)

Asian markets fell in early trade on Wednesday after Pyongyang called off talks with Seoul, throwing a major US-North Korean summit into question, and after a spike in the US 10-year Treasury yield to a seven-year high knocked sentiment on Wall Street.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.1 percent.

Strong US retail and factory data on Tuesday pushed the US 10-year yield through a key level to hit 3.095, its highest since July 2011. The rise in yields hurt US share markets on concerns it would undercut stock valuations.

Asian shares are under pressure after North Korea cancelled high-level talks with Seoul, denouncing military exercises between South Korea and the United States, breaking from several months of easing relations on the peninsula.

This has also raised concerns about the planned summit between US President Donald Trump and his North Korean counterpart leader Kim Jong-un scheduled next month.

"This will weigh on the Korean reconstruction beneficiaries that have had a strong run on peace and even reunification hopes recently," JPMorgan analysts wrote in a note. "The broader risk for the region if talks do break down is that Trump no longer feels the need to keep China on side and could escalate trade tensions again."

South Korea's KOSPI was 0.4 percent lower, Japan's Nikkei was down 0.3 percent and Australian stocks edged up 0.1 percent.

New Zealand's S&P/NZX 50 index was down around 1.4 percent after earlier falling as much as 2.3 percent, after dairy company A2 Milk Ltd's revenue guidance fell short of analyst expectations, knocking the shares to a three-month low.

In the United States, stronger growth and the potential for steadily rising inflation have added to expectations the US Federal Reserve may move to increase interest rates at a faster pace.

The 10-year yield was last at 3.0686 percent.

The two-year yield, which rises with traders' expectations of higher Fed fund rates, hit 2.5890 percent on Tuesday, its highest level since August 2008, and was last at 2.5766 percent.

On Wall Street, the Dow Jones Industrial Average fell 193.00 points, or 0.78 percent, to 24,706.41, the S&P 500 lost 18.68 points, or 0.68 percent, to 2,711.45 and the Nasdaq Composite dropped 59.69 points, or 0.81 percent, to 7,351.63.

In energy markets, crude oil prices remained near recent highs amid concerns US sanctions on Iran may restrict crude exports from a major producer.

The dollar was mostly flat against the yen at 110.29.

The US dollar index, which tracks the greenback against a basket of six major rivals, was up 0.05 percent at 93.270. On Tuesday, the index had hit its highest level this year, lifted by the 10-year yield.

In commodities markets, gold was slightly higher, with spot gold trading at $1293.11 per ounce.

Source: Reuters