Canadian authorities have arrested a top executive of Chinese tech giant Huawei Technologies, fanning fears of further tensions between China and the United States.
US stock futures tumbled on Thursday and Asian markets looked set, according to Reuters.
S&P500 e-mini futures fell almost two per cent at one point in thin Asian morning trade and were last were down 0.7 per cent.
The Canadian Justice Department said Meng Wanzhou, deputy chair of Huawei, was arrested early this month and that she was sought for extradition by the United States.
The arrest heightened the sense of a major collision between the world's two largest economic powers not just over tariffs but also over technological hegemony.
It also came as an inversion in the US yield curve has stoked global investor worries of a possible US recession.
Australian shares were down 0.3 per cent but MSCI's broadest index of Asia-Pacific shares outside Japan were little changed, ahead of opening of most other markets in the region.
Futures pointed to a fall of 0.4 per cent in Japan's Nikkei. Currencies were steadier, with major currencies little changed so far.
The euro traded flat at $1.1347 while the dollar dipped 0.1 per cent against the yen to 113.01. The yuan is also unmoved at 6.8660 in the offshore trade.
US Treasuries futures were also almost flat.
The benchmark Treasury 10-year yield fell to its lowest point since mid-September on Tuesday while the five-year yield dropped below the two-year yield, causing a so-called inversion in the yield curve.
Because an inverted curve has often tended to precede a recession, investors were spooked by that.
US markets were closed on Wednesday to mark the death of former president George H.W. Bush.
(Editing by Kim Coghill)