Worries that US lawmakers might not agree to a fresh stimulus deal any time soon sent most Asian markets lower Wednesday, with Wellington taking a hit after New Zealand recorded its first local virus transmission in more than 100 days.

While concerns about China-US tensions and the reimposition of lockdowns in various countries have been weighing on investor confidence in recent weeks, optimism has been supported by expectations the US will stump up another massive rescue package to accompany ultra-loose monetary policy.

Even the slow progress on Capitol Hill for more than a week did little to change the view that both sides would eventually find common ground to provide much-needed money for the world's top economy, particularly with an election just around the corner.

But Senate Majority Leader Mitch McConnell gave traders a jolt when he told Fox News there had been no progress, fanning concerns the talks could take a lot longer than envisaged.

"And so another day has gone by with an impasse and they need to get together," McConnell said, sparking a sell-off on Wall Street, which had been well in positive territory until then.

"The hope was that US politicians will look to restart negotiations on a new fiscal stimulus this week. Now with no talks scheduled, the deadlock between Republicans and Democrats is at risk of dragging on for weeks," National Australia Bank's Rodrigo Catril said.

Hong Kong fell 0.6 percent and Shanghai retreated more than one percent while Sydney slipped 0.5 percent and Seoul dropped 0.3 percent.

Singapore, Jakarta and Taipei were all down. But Tokyo was slightly higher by lunch thanks to a weaker yen.

"When you walk back the market's expectations of an imminent fiscal deal, it is like poking the balloon with a straight pin as all semblance of near-term optimism gets immediately deflated," said AxiCorp's Stephen Innes.

"Let us face it, the only relevant information that might aid investors' comprehension of the path of the real economy has come from fiscal stimulus chatter.

"Take that out of this week's equation, and you are left hoping on a wing and a prayer for a vaccine."

Wellington dropped more than one percent after a three-day lockdown was announced for Auckland, New Zealand's biggest city with a population of 1.5 million, after four people tested positive, ending a 102-day run that had fanned hopes the disease had been contained.

Mitch McConnell
Mitch McConnell poured cold water on hopes US lawmakers will reach an agreement on a new stimulus any time soon, fanning concerns about the world's number-one economy Photo: AFP / MANDEL NGAN

Gold prices fell more than five percent, extending the previous day's sell-off on profit-taking and owing to a pick-up in the dollar, which had been hammered through July, helping the yellow metal to multiple records.

Analysts said easing concerns about the future of the China-US trade pact and healthy China data also provided some cheer to investors, giving them the confidence to shift out of safe havens such as gold and the yen.

Tokyo: Nikkei 225: UP 0.2 percent at 22,789.15 (close)

Hong Kong: Hang Seng: DOWN 0.6 percent at 24,734.24

Shanghai: Composite: DOWN 1.3 percent at 3,297.12

Euro/dollar: DOWN at $1.1725 from $1.1734 at 2045 GMT

Dollar/yen: UP at 106.66 yen from 106.50 yen

Pound/dollar: DOWN at $1.3028 from $1.3047

Euro/pound: UP at 89.98 pence from 89.94 pence

West Texas Intermediate: UP 0.2 percent at $41.69 per barrel

Brent North Sea crude: UP 0.3 percent at $44.65 per barrel

New York - Dow: DOWN 0.4 percent at 27,686.91 (close)

London - FTSE 100: UP 1.7 percent at 6,154.34 (close)

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