Asian shares failed to catch a firm lead from a bumper Wall Street session on Friday as the spread of the Delta variant of the coronavirus across the region heightened worries about the its economic recovery.
MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.35%, dragged down by Chinese blue chips, which fell 0.56% and Hong Kong down 0.46%.
Japan's Nikkei rose 0.11%.
"There are two main drivers of volatility in the market this week, firstly everything surrounding the Chinese regulatory drive, and secondly the severity of Delta outbreaks around the region," said Carlos Casanova, senior economist Asia at UBP.
China on Friday reported 124 confirmed cases for Aug. 5, its highest daily count for new coronavirus cases in the current outbreak, fuelled by a surge in locally transmitted infections. Authorities have imposed travel restrictions in some cities.
Thailand and Malaysia both reported record daily cases on Thursday.
While the MSCI Asian benchmark has clawed back much of last week's China-driven losses, it is still down just over 10% from all time highs hit in February.
In contrast, the MSCI world shares index is trading just shy of a record high hit on Wednesday.
"International investors are still wrapping their head around what happened in the education sector (in China), and expect that will continue to drive sentiment," said Casanova.
"The regulatory drive is not over yet, it should continue to be a factor in the next three to six months or so," he said.
Elsewhere in the region, PT Bukalapak.com Tbk, an Indonesian e-commerce company backed by Ant Group and Singapore sovereign fund GIC, rose 24.7% on its market debut after raising $1.5 billion in the country's biggest ever initial public offering.
Analysts say the listing will set the benchmark for IPO hopefuls in a region where global investors are chasing fast growing companies.
The Nasdaq and S&P 500 closed at record levels on Thursday after a spate of strong corporate earnings and a further decline in U.S. unemployment claims. Eyes are now on the jobs report for July due later today.
U.S. stock futures, the S&P 500 e-minis, were down 0.1%.
Treasury yields extended their gains in Asian hours, having earlier been helped by the healthy jobless claims report.
Benchmark 10-year Treasury notes yields rose to 1.2369% compared with its U.S. close of 1.217% on Thursday.
This had a knock-on effect for the dollar, which rose against the yen to a week high.
The stronger dollar and potential for higher yields hurt gold. The spot price fell 0.12% to $1,801.81.
Oil paused for breath in early Asian trading on Friday, but was set for its biggest weekly loss since October after falls earlier in the week due to rising COVID-19 cases and a surprise build in U.S. crude stockpiles.
U.S. crude was $69.1 a barrel, up 0.01%. Brent crude was $71.28 per barrel, down 0.01%.