Asian markets tumbled on Wednesday as investors ignored a slew of upbeat economic data from around the world to instead enter a defensive selling mode after a series of strong recent gains.

Tokyo's Nikkei dived 2.37 percent, hit by the double whammy of falling US stocks and a stronger yen, which is bad for exporters.

Hong Kong slipped 1.58 percent by noon and Seoul closed 0.61 percent down.

The falls came despite signs that economies were on the path to recovery from the effects of the global downturn, as the US, eurozone and China posted manufacturing growth while Australia said GDP grew in the June quarter.

Investors instead took their cue from Wall Street's 1.96 percent slump overnight, its second successive loss.

The bearish outlook in New York trampled early gains "in spite of bullish economic data that showed the manufacturing sector expanded for the first time in 19 months," Charles Schwab & Co. analysts said in a note to clients.

Figures showing the US manufacturing sector grew in August after 18 consecutive monthly declines was hailed by President Barack Obama as "a sign that we are on the path to economic recovery".

The Institute of Supply Management said its index of the factory sector, also known as the purchasing managers index, beat analyst expectations to jump to 52.9 percent from 48.9 percent in July. Any number above 50 indicates growth.

"The year-and-a-half decline in manufacturing output has come to an end, as 11 of 18 manufacturing industries are reporting growth when comparing August to July," said ISM survey chief Norbert Ore.

However it failed to sway sceptical investors waiting to see if such upbeat data would help buoy corporate earnings, dealers said.

The US results chimed with other manufacturing reports around the world.

A widely-watched index of manufacturing activity in the 16-nation eurozone hit a 14-month high in August, still indicating contraction but continuing a gradual rise from historic lows.

Meanwhile China's manufacturing activity expanded in August at its fastest pace in 16 months, data showed Tuesday. In response, Shanghai shares edged 0.54 percent higher by noon on Wednesday.

The data pointed to stabilisation in the Asian giant and a boost for the many countries that rely on Beijing for their exports.

However, China shares have been volatile in recent sessions amid fears that the government may curb lending, which in turn would crimp liquidity and stymie a regional recovery.

Australia posted economic growth of 0.6 percent in the June quarter, official figures showed, confirming its status as the best performer in the developed world as massive stimulus plans boosted domestic spending.

"When every other major advanced economy has fallen into technical recession, we have not," Treasurer Wayne Swan said.

However, Sydney's benchmark S&P/ASX200 index was 1.84 percent lower in intraday trade as worries about Wall Street's losses and the so-called "September effect" instead coloured sentiment.

"Welcome to September, historically the toughest month of the year for investors," said Fred Dickson, chief market strategist at DA Davidson & Co.

"We are seeing some pullback in the market as we begin September over the concern that the market has overextended itself," said Andy Douglass of PNC Bank.