Asia-Pacific markets tumble after Nasdaq records its worst day since 2022; Japan trade deficit narrows

Asia-Pacific markets were mostly set to decline after the Nasdaq Composite fell nearly 2.8% overnight — posting its worst day since December 2022.

The tech-heavy index slid 2.77% to end at 17,996.92 as investors continued to favor rate-sensitive stocks over big tech names amid optimism on possible rate cuts following Fed Chair Jerome Powell's caution on keeping rates higher for longer.

Over in Asia, investors weighed Japan's latest trade data.

Japan's exports rose 5.4% year on year in June, a steep decline from 13.5% in May. Imports grew 3.2% year on year last month, down from 9.5% in May. Both exports and imports missed Reuters expectations of 6.4% and 9.3% respectively.

Japan's trade deficit narrowed from 1.2 trillion yen, or $7.7 billion, to 224 billion yen.

Japan's Nikkei 225 declined 1.32%, while the Topix followed suit with a 1% slide.

South Korea's Kospi dipped 1.27%, while the small-cap Kosdaq lost 1.48%.

Australia's benchmark index dipped marginally, as investors wait for employment data to be released later in the day.

Hong Kong's Hang Seng index futures were at 17,685, lower than the HSI's last close of 17,739.41.

Overnight in the U.S., the Dow Jones Industrial Average added 243.60 points, or 0.59%, to end at 41,198.08. This is the first time the index closed beyond 41,000. The broad S&P 500 shed 1.39%, with the information technology and communication services industries being the weakest performers in the session.

—CNBC's Alex Harring and Pia Singh contributed to this report.