Asian share markets stumbled on Monday and the Australian dollar took a hit after disappointing news on Chinese manufacturing underlined the need for further policy stimulus in the world's second biggest economy.
The HSBC/Markit Purchasing Managers' Index (PMI) fell to 48.9 in April - the lowest level since April 2014 - from 49.6 in March, as demand faltered and deflationary pressures persisted.
"China's manufacturing sector had a weak start to Q2, with total new business declining at the quickest rate in a year while production stagnated," said Annabel Fiddes, an economist at Markit.
"The PMI data indicates that more stimulus measures may be required to ensure the economy doesn't slow from the 7 percent annual growth rate seen in Q1.”
The Australian dollar, often used as a proxy for China risk, fell a quick 20 ticks to $0.7812, though upbeat data at home helped put a floor under it.
Shanghai shares were off 0.6 percent, while the CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 0.3 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan edged down 0.2 percent.
Australian stocks were a fraction lower on concerns over bank earnings, but South Korea's main index managed to inch up 0.3 percent.
Trading was thinned by the absence of Japanese markets which are on holiday from Monday to Wednesday.
The British election on Thursday will add political uncertainty to the mix, with neither of the major parties likely to win a clear majority of seats.
On Wall Street, the Dow had ended Friday up 1.03 percent, while the S&P 500 gained 1.09 percent and the Nasdaq 1.29 percent.
One major development last week was a sharp and sudden back up in Eurozone yields that suggested the long bull run in bonds might finally have run out of steam.
Tentative signs of an economic pick up in the region sent German 10-year Bund yields up nearly 21 basis points for the week, the biggest such move since June 2013.
Investors have also been tempted by a rush of longer-dated issuance from major corporates which offer better returns, leading them to pare back sovereign holdings.
As a result 10-year US Treasury yields were at a seven-week high of 2.124 percent.
"We think bond markets are already priced for very gloomy medium term economic scenarios of low growth and little inflation pressure for years – almost 'as good as it gets' for bond markets," said Peter Schaffrik, chief European macro strategist at RBC Capital Markets.
"We think the risks are skewed heavily to the upside and expect higher yields over the course of the year against a more positive economic backdrop in the US and Europe."
The jump in bund yields had combined with a run of less than impressive US economic data, to lift the euro to a nine-week peak of USD 1.1289 on Friday. There it ran into profit taking and was hovering around USD 1.1192 in Asia on Monday.
The dollar fared better on the yen, rising to 120.14 yen but short of tough chart resistance at 120.84. Against a basket of currencies, the dollar was steady at 95.249.
In commodity markets, oil prices had eased off 2015 highs after Iraq said its crude exports hit a record in April, keeping Middle East production well above demand.
Brent crude was quoted 25 cents lower at USD 66.21 a barrel, while US crude eased 37 cents to USD 58.78.
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