There is also nervousness about Sunday’s Italian election, which is too close to call and which markets have warned could send the economy back into crisis if there is no clear winner.

On Wall Street the Dow was down 0.34 per cent, the S&P 500 eased 0.63 per cent and the Nasdaq dropped 1.04 per cent after worse-than-expected US business activity data, while new claims for unemployment benefits rose last week.

Traders are also increasingly nervous about the lack of progress in Washington on a deal to avert the sequester, deep government spending cuts economists say will slow US growth.

“The Hang Seng Index remains in correction mode, reflecting the weaker US and regional stocks. The downward trend may last for another week,” KGI Asia chief operating officer Ben Kwong said.

Among Hong Kong financial stocks BOC Hong Kong eased 0.6 per cent to HK$25.85, while Industrial & Commercial Bank of China fell 1.1 per cent to HK$5.49.

However, utility stocks enjoyed a lift. Power Assets rose 1.3 per cent to HK$70.80 and CLP was up 0.3 per cent at HK$66.85.

Chinese shares closed down 0.51 per cent. The benchmark Shanghai Composite Index fell 11.79 points to 2,314.16 on turnover of 87.6 billion yuan (HK$107.98 billion). The index lost 4.86 per cent over the week.

“The market may still have downside room after the consolidation, given signs of monetary tightening,” Southwest Securities analyst Zhang Gang told Dow Jones Newswires, citing the central bank’s move on Tuesday to drain liquidity from the money market.

Among financials China Minsheng Banking fell 2.76 per cent to 9.50 yuan and New China Life Insurance dropped 1.84 per cent to 26.69 yuan.

Cement producers were sold on possible tightening in the domestic property sector, with Shaanxi Qinling Cement down 2.54 per cent to 6.53 yuan while Anhui Conch Cement lost 1.28 per cent to 18.48 yuan.