The overnight JOLTS report on job openings – closely watched by the Federal Reserve – pointed to extremely tight labour conditions, defying the Fed's tightening efforts so far and bolstering the case to do more.

To discourage speculation about rate reductions next year, New York Fed President John Williams said on Tuesday that the central bank likely needed to get the policy rate above 3.5 percent, and was unlikely to cut rates at all in 2023.

"The strong JOLTS data and Fed rhetoric was the overwhelming narrative," knocking stocks further and pushing up bond yields, Tapas Strickland, an analyst at National Australia Bank, wrote in a note to clients.

"Financial conditions are a key transmission mechanism for monetary policy, and equities are part of that."

Japan's Nikkei sagged 0.6 percent, while Australia's share benchmark slid 0.4 percent and South Korea's Kospi lost 0.5 percent.

Chinese blue chips retreated 0.5 percent. Hong Kong's Hang Seng slumped 1.8 percent, with its tech shares tumbling 2.5 percent.

MSCI's broadest index of Asia-Pacific stocks declined 0.7 percent. Its world equity index slumped 0.9 percent on Tuesday, for a third straight day of losses.

US equity futures though pointed to some respite, with S&P 500 e-minis indicating a 0.3 percent rebound from the index's 1.1 percent slide on Tuesday.

Investors will now be even more attentive to the monthly US jobs report on Friday.

Earlier on Tuesday, data showed German inflation rose to its highest in almost 50 years in August, strengthening the case for the European Central Bank to also go for a super-sized rate hike next month.

Money markets currently place 68.5 percent odds of a 75 basis-point increase by the Fed on Sept. 21.

The two-year US Treasury yield, which is relatively more sensitive to the monetary policy outlook, hit a fresh 15-year high at 3.497 percent overnight, but eased back to 3.4558 percent in Tokyo trading.

The 10-year Treasury yield, which hit a two-month high of 3.153 percent on Tuesday, stood at 3.1137 percent.

The dollar index, which measures the currency against six major peers, softened slightly to 108.69, after starting the week by marking a new two-decade high at 109.48.

Gold was little changed at $1,723.62, hovering near a one-month low of $1,719.56, set Monday.

Crude oil rebounded from declines of more than $5 overnight, as industry data showed US fuel stocks fell more than expected.

US West Texas Intermediate (WTI) crude futures rose 64 cents to $92.28 a barrel in early Asian trading, after sliding $5.37 in the previous session driven by recession fears.

Brent crude futures climbed 48 cents, or 0.5 percent, to $99.79 a barrel, trimming Tuesday's $5.78 loss.