Even a fourth successive record on Wall Street was not enough to stoke a rally, with a fresh flare-up in virus cases in the region keeping dealers grounded.

The mood in Asia was more downbeat compared with earlier in the week with Bloomberg News reporting China had fired four ballistic missiles as part of a military exercise by the People's Liberation Army, a day after a US spy plane carried out a flyover.

The region is one of a number of issues that have seen China-US tensions spike in recent months. In July, Washington declared Beijing's pursuit of territory and resources there illegal, explicitly backing the territorial claims of Southeast Asian countries against China.

And on Wednesday it imposed sanctions and restrictions on 24 Chinese companies and associated officials for taking part in building artificial islands in the disputed waters.

The US Commerce Department said the firms "enabled China to construct and militarise disputed outposts in the South China Sea".

Hong Kong led losses, dropping one percent with HSBC losing more than two percent after being slammed by US Secretary of State Mike Pompeo over reports it had frozen access to credit card and bank accounts for executives of independent media group Next Media.

Tokyo and Singapore were both down 0.5 percent, Shanghai eased 0.2 percent and Seoul was off 0.7 percent, though Sydney, Taipei and Jakarta squeezed out small gains.

With earnings season gone and China-US trade talks now settled for now -- despite ongoing tensions -- the next point of focus is Powell's presentation Thursday at the virtual meeting of global central bankers, in which he is expected to outline the Fed's plans for monetary policy.

The bank has provided crucial support worth trillions of dollars to the world's top economy during the virus crisis, helping stocks bounce back from their March troughs.

While observers predict the speech will outline a new policy framework for inflation and interest rates, there is also some hope for some further easing measures, especially with lawmakers in Washington failing to reach any agreement on a new stimulus.

Oil traders are keeping tabs on Hurricane Laura in the Gulf of Mexico, which is set to hammer the coasts of Texas and Louisiana.

Around three million barrels a day of refining capacity have been closed after US authorities said the hurricane could bring "potentially catastrophic storm surges, extreme winds and flash flooding".

Crude prices were flat but were holding around five-month highs.

- Key figures around 0230 GMT -

Tokyo - Nikkei 225: DOWN 0.5 percent at 23,186.61 (break)

Hong Kong - Hang Seng: DOWN 1.1 percent at 25,218.82

Shanghai - Composite: DOWN 0.2 percent at 3,321.79

Euro/dollar: DOWN at $1.1826 from $1.1831 at 2115 GMT

Dollar/yen: UP at 106.05 yen from 105.97 yen

Pound/dollar: DOWN at $1.3200 from $1.3203

Euro/pound: UP at 89.62 pence from 89.54 pence

West Texas Intermediate: DOWN 0.1 percent at $43.34 per barrel

Brent North Sea crude: UP 0.2 percent at $45.71 per barrel

New York - Dow: UP 0.3 percent at 28,331.92 (close)

London - FTSE 100: UP 0.1 percent at 6,045.60 (close)