A day after Chinese Premier Wen Jiabao said that the government was targeting 7.5% growth this year compared with 8% growth targets for each of the past seven years, markets remained on edge amid the backdrop of the European debt crisis and worries of fresh headwinds for the global economy from rising oil prices.
"The forecast served as a reminder that while China is expected to engineer a soft landing, it remains a decelerating growth story. In a world starved for growth this is an unwelcome forecast," said Stewart Hall, senior currency strategist at RBC Dominion Securities in a note.
Separately, U.S. service sector and factory orders readings came in above view, but investors were preoccupied by the slower growth outlook for China.
Japan's Nikkei Stock Average was down 0.4%, Australia's S&P/ASX 200 was off 0.8% at 4226.9, South Korea's Kospi Composite was 0.4% lower and New Zealand's NZX-50 was up 0.3%
Dow Jones Industrial Average futures were down seven points in screen trade.
China-linked stocks in the region lost ground with Posco down 2.3% and Hyundai Steel 2.2% lower in Seoul, while Fanuc lost 2.4% and Komatsu declined 1.7% in Tokyo.
Resources stocks in Sydney were also hit by China's revised gross domestic product forecast as the world's second largest economy is a key importer of Australia's raw materials. BHP Billiton was down 2.3% and Rio Tinto fell 2.0%. The benchmark index slipped to a two-week low of 4220.2.
A relatively stable Japanese yen and encouraging U.S. data had only a modest positive impact on exporters in Tokyo.
"The U.S. market declined as China lowered its growth target, but the U.S. economic indicators themselves weren't too bad," said Yumi Nishimura, senior market analyst at Daiwa Securities; "additionally, the yen hasn't strengthened further."
Toyota Motor was up 0.2%, but others such as Sony and Canon were off 0.7% and 0.5%, respectively.
Kobe Steel dropped 3.0% after it announced Monday that there would be no term-end dividend for the fiscal year ending March 2012.
The euro was trapped in rangebound trade as investors awaited further developments out of Europe.
Sumino Kamei, a senior analyst at Bank of Tokyo-Mitsubishi UFJ, said that the euro may be pressured lower as concerns over the Greece debt crisis weigh, ahead of Thursday's deadline for Greece's private creditors to decide whether to sign off on a massive debt writeoff.
The common currency was at $1.3222 against the greenback from $1.3217 late Monday in New York, and ¥107.64 against the Japanese yen from ¥107.77. The dollar was at ¥81.40 from ¥81.54.
Traders were also watching out for the Reserve Bank of Australia's interest rate decision due later for cues. Economists expect interest rates to remain on hold for a second meeting, but some surprises may emerge in Governor Glenn Stevens' statement.
Spot gold was at $1,707 per troy ounce, up 60 cents from its New York settlement on Monday. April Nymex crude oil futures were up 46 cents at $107.18 per barrel on Globex.
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