MSCI's broadest index of Asia-Pacific shares outside Japan reversed course to trade 0.2 percent lower at 511.39, pinned near the eight-week low it touched on Monday.

The index was set to end the month down about 7 percent, which would erase almost all of the gains made in January, when share markets had risen on expectations that major central banks were done with hiking rates.

Since then a slew of US economic data has reinforced the view that interest rates will rise further and stay high for longer.

Data on Monday showed US core capital goods orders accelerated in January, beating forecasts, while contracts to buy previously owned US homes rose the most in more than 2-1/2 years in January.

Futures indicated European stocks were set for a subdued start to the day with German DAX futures down 0.05 percent, FTSE futures down 0.03 percent and Eurostoxx 50 futures 0.07 percent lower.

"Investors are now contemplating a scenario of continuing growth and above trend inflation," said Stephane Monier, chief investment officer at Lombard Odier.

Fed futures now reflect rates peaking at around 5.4 percent, implying at least three more hikes from the current 4.50 percent to 4.75 percent band, and some chance of 50 basis points in March.

In Asia, Japan's Nikkei rose 0.01 percent, while Australia's S&P/ASX 200 index gained 0.47 percent.

China shares fell 0.3 percent while Hong Kong's Hang Seng index was 0.6 percent lower and was on track to end its three month winning streak as the China reopening rally loses steam.

China shares have also been weighed down by rising geopolitical tension, with uncertainty over US-China relations keeping investors wary.

"Investors are likely to be monitoring any escalation from the Russia-Ukraine war," ActivTrades market analyst Anderson Alves said. "Any concrete action from China in support of Russia could be seen as a strong rationale for a derisk and deleverage from Asian exposure."

Investors will get more information on the state of the global economy this week, with US ISM manufacturing and services survey data for February due on Wednesday and Friday, respectively. Preliminary euro zone consumer price inflation data for February is due on Thursday.

In the currency market, sterling was last trading at $1.204, down 0.18 percent, having jumped 1 percent overnight after Britain struck a new trade deal with the European Union, brightening the outlook for the post-Brexit UK economy.

The euro was down 0.22 percent to $1.0585, after rising 0.6 percent on Monday.

The dollar index, which measures US currency against six other peers, was up 0.172 percent at 104.83 and was set to snap a four month losing streak.

US crude rose 0.28 percent to $75.89 per barrel and Brent was at $82.58, up 0.16 percent on the day.

Elsewhere, Chicago wheat futures were hovering near a 17-month low due to rains in parts of the US winter wheat belt and optimism over a Russia-Ukraine export deal.