Wall Street stocks tumbled Wednesday as traders weighed the latest US data showing slowing economic activity, while the yen retreated after the Bank of Japan decided against further tweaking monetary policy.
Major indices in New York had opened higher following US data showing a surprisingly big drop in December retail sales and a decline in wholesale prices.
The reports added to expectations of an upcoming pivot by the Federal Reserve away from aggressive interest rate hikes, boosting sentiment.
But stocks went negative soon after the open, adding to losses in the afternoon. The S&P 500 finished down 1.6 percent.
"It seems like we got a little overbought," said Maris Ogg of Tower Bridge Advisors.
Sam Stovall, chief investment strategist at CFRA Research, said the US data had also "highlighted recession risks."
But hopes for China's recovery continued to provide much-needed support, with Vice Premier Liu He telling the World Economic Forum that growth would likely rebound this year as the country reopens after zero-Covid.
His comments came after data showed the Chinese economy expanded last year at its slowest pace since 1976 -- excluding pandemic-hit 2020 -- but still beat forecasts.
The news added to hopes for a global recovery after last year's pain caused by rising prices, interest rate hikes, China's economic woes, war in Ukraine and a spike in energy costs that the conflict sparked.
- Dollar falls against euro -
In foreign exchange, the yen pulled back against the dollar.
Traders had been keenly anticipating the Bank of Japan decision after it last month shocked markets by announcing a tweak that allowed its tightly controlled bond yields to move in a wider bracket.
The move in December sent the yen soaring, and while the bank held firm Wednesday, there is a growing expectation that officials will eventually move away from the policy of buying up bonds to keep yields in check.
"Speculation will remain that it will eventually review its policy," Takahide Kiuchi, executive economist at Nomura Research Institute and a former BoJ policy board member, told AFP.
Shares in tech giant Microsoft slumped 1.9 percent after it confirmed it would cut 10,000 jobs due to the poor economic outlook.
- Key figures around 2130 GMT -
New York - Dow: DOWN 1.8 percent at 33,296.96 (close)
New York - S&P 500: DOWN 1.6 percent at 3,928.86 (close)
New York - Nasdaq: DOWN 1.2 percent at 10,957.01 (close)
London - FTSE 100: DOWN 0.3 percent at 7,830.70 (close)
Frankfurt - DAX: DOWN less than 0.1 percent at 15,181.80 (close)
Paris - CAC 40: UP 0.1 percent at 7,083.39 (close)
EURO STOXX 50: FLAT at 4,174.34 (close)
Tokyo - Nikkei 225: UP 2.5 percent at 26,791.12 (close)
Hong Kong - Hang Seng Index: UP 0.5 percent at 21,678.00 (close)
Shanghai - Composite: FLAT at 3,224.41 (close)
Dollar/yen: UP at 128.80 yen from 128.12 yen on Tuesday
Euro/dollar: UP at $1.0797 from $1.0788
Pound/dollar: UP at $1.2344 from $1.2286
Euro/pound: DOWN at 87.43 pence from 87.80 pence
Brent North Sea crude: DOWN 1.1 percent at $84.98 a barrel
West Texas Intermediate: DOWN 0.9 percent at $79.48 a barrel