Asian markets tumble as geopolitical fears set in

Hong Kong: Asian markets plunged on Tuesday as geopolitical risks pile up, from US tensions with Russia and Saudi Arabia, to trade issues and Italy's budget stand-off with the European Union.

Hong Kong lost more than three percent to wipe out its gains from the previous two trading days, while Shanghai and Tokyo were more than two percent off.

The losses brought an end to a rally that was fuelled by China's top brass issuing coordinated statements of support for the country's markets and officials unveiling tax cut plans.

The advances had provided some much-needed support to Asia but investors reverted to selling on Tuesday, with nerves tested further after Donald Trump's warning that he will pull out of a nuclear treaty with Russia and bolster America's arsenal.

"Global financial markets continue to struggle to rally as various geopolitical concerns weigh on investor confidence," Nick Twidale, chief operating officer at Rakuten Securities Australia, said.

He added that with regards to China, dealers "will be very keen to see if they can maintain the stellar run that they've experienced over the last couple of days," he said.

"With the rest of the world looking much more pessimistic in the current environment there could be a firm correction on the cards." Shanghai sank 2.3 per cent, having jumped more than six per cent since Thursday's close, while Hong Kong fell 3.1 per cent in the afternoon.

Chen Jihao, partner at Gaoxi Hedge Fund in Beijing, said the words of support from Beijing would only have a limited impact and expects further selling as Chinese leaders struggle to boost the economy while fighting a huge debt mountain.

"Stocks in the past two days were like a patient, just coming out of the ICU and going straight to the nightclub -- the symptoms may have temporarily gone away, but it is far from cured, and it's only a matter of time before medicine starts to wear off," he told Bloomberg News.

"I still abide by the belief that there will be no bull market in a deleveraging process."

Tokyo plunged 2.7 per cent, Sydney lost more than one per cent and Singapore fell 1.3 per cent. Seoul dived 2.6 per cent, Wellington lost 1.5 per cent and Taipei was two per cent off.

There were also steep losses in Manila, Mumbai and Jakarta.

Asia was given a tepid lead from Wall Street, where traders are turning their attention to next month's midterm elections, which could turn control of Congress over to the Democrats.

With the polls in mind, Trump has been on a tour of the country, ramping up his nationalistic rhetoric.

On Monday he said he is ready to add to America's nuclear stockpiles after announcing he will pull the nation out of a decades-old agreement with Moscow.

There is also growing unease about Italy's row with the EU over its purse-busting budget, which Brussels said breaks the bloc's financial rules.

The populist government in Rome has refused to back down and cut its spending promises despite warnings about the country's economic outlook. The standoff comes as officials struggle to hammer out a Brexit agreement with a deadline for Britain to leave the EU in sight.

Pressure is also growing on Saudi Arabia after it admitted that a journalist critical of Riyadh had been killed at its Istanbul consulate.

The flight to safety sent the dollar rallying against most higher-yielding currencies, with South Korea's won down 0.8 per cent, the Australian dollar off 0.5 per cent and the Mexican peso 0.6 per cent off. However, the yen, a go-to unit in times of uncertainty climbed against the greenback.

In early trade London fell 0.8 per cent, Paris lost 0.6 per cent and Frankfurt dived 1.4 per cent.