China, Fed Worries Weigh
China's official Purchasing Managers' Index (PMI) dipped to 50.1 in June from May's reading of 50.8, as industrial activity slows amid concerns of overcapacity and weak demand. A reading above 50 signals expanding activity while one below that level indicated a contraction.
(Read More: Why China's Economy May Be Headed for a Crash)
Comments from Federal Reserve Governor Jeremy Stein on Friday suggested that the U.S central bank's upcoming September policy meeting could mark the beginning of the Fed's stimulus withdrawal. Stein's statements contradicted other Fed policymakers, who have suggested the central bank will bide its time before scaling back bond purchases.
Nikkei Slips 0.3%
Japan's benchmark index fell below the 13,700 level after initially jumping to a one-month high, shrugging off an upbeat survey of domestic business activity.
The Bank of Japan's "Tankan" survey showed sentiment among big firms turning positive for the first time in two years as optimism over Prime Minister Shinzo Abe's radical stimulus policies - dubbed "Abenomics" - offset concerns about recent market volatility.
"Markets are forward-looking so I think most of the good news was priced in. The equity markets don't always line up with the real economy, but I think this [the Tankan] is almost an unambiguously good number for Japan," said Paul Gruenwald, chief economist, Asia Pacific at Standard and Poor's Ratings Services.
(Read More: Conspicuous Spending in Japan on the Rise)
Financials led the declines with Shizuoka Bank and Chiba Bank down 2 percent.
The upbeat data saw dollar-yen hit a new three-week high at the 99.50 handle and boosted exporter stocks. Machinery maker Yaskawa Electric and construction firm Kajima rose over 5 percent each.
Sydney Skids 1%
Australian equities came under pressure as concerns over a slowdown in the nation's largest trading partner, China, kept investors on the sidelines.
The Australian dollar hit its lowest levels in nearly three years against the greenback at the $.09105 level in early trade and that weighed on banking stocks. All of Australia's "Big 4" lenders fell over 1 percent each while Macquarie Group lost nearly 2 percent.
Shares of Boart Longyear fell over 4 percent after slashing its 2013 earnings forecast.
(Read More: The Great Rotation? That Still Hasn't Happened)
Kospi Steady at 1,850
South Korean investors tracked Asia-wide caution on concerns over China's latest factory activity data and a paring down of U.S. stimulus.
A weaker yen weighed on exporters, leading 2 percent declines in automakers Hyundai Motors and Kia Motors. Memory chip maker LG Display lost 2.5 percent while Samsung Electronics eased nearly 1 percent.
— By CNBC.com's Nyshka Chandran. Follow her on Twitter @NyshkaCNBC
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