By Kenan Machado

Asian stocks fell Tuesday after broad gains the day before, following overnight weakness in Europe.

But Hong Kong equities were volatile in their first full day of trading in nearly a week following the Lunar New Year holiday.

The Hang Seng Index fell as much as 1.3% early on when big financial stocks, particularly China-based companies, experienced weakness. By late morning the benchmark was up 0.7%, but it didn't last.

Index major HSBC's fourth-quarter report disappointed investors--specific stock-buyback targets weren't released and pretax earnings missed consensus. The big lender's Hong Kong-listed stock was recently down 1.9%, while the Hang Seng Index was off 0.1%.

With Chinese markets closed until Thursday for the holiday, investors should be cautioned against reading too much into recent price action due to "very, very thin" volumes, said Andrew Bresler, deputy head of sales trading Asia Pacific at Saxo Capital Markets.

After solid gains Monday, Japan's Nikkei and Korea's Kospi each fell just over 1%. The Nikkei, Asia-Pacific's best performer Monday with its jump of 2%, was weighed down by electronics and some financial stocks.

The selling came even as the yen widely eased slightly versus other currencies. Against the dollar, it was around Yen106.80 versus Yen106.49 at Monday's Tokyo stock-market close.

The Kospi was hit by Samsung Electronics, which ended down 2% after Monday's 1.3% decline. Shares jumped 9.6% last week, the most in 2 1/2 years.

Other major regional stock benchmarks were down no more than 0.3% Tuesday, though India's Sensex edged higher after yesterday dropping 0.7%. Markets in Taiwan will reopen Wednesday after a week-long holiday.

S&P 500 futures were recently down 0.2% ahead of the start of a holiday-shortened trading week in the U.S. The index, after early February's slump, logged its biggest gain last week in five years.

While earnings season continues, especially in places such as Australia, investors are already looking beyond the latest, generally strong, updates in the wake of the cross-market uncertainty that has developed this month, said Paul Kitney, chief strategist for Asia-Pacific stocks at Daiwa Capital Markets in Hong Kong.

Tuesday's relative calm in most of Asia comes as "we are entering a new phase that will be characterized by more volatility and further corrections," said Larry Hatheway, chief economist at GAM Investments.

He noted rising inflation in the U.S. and Europe has markets second-guessing the future course of central-bank action as current easy-money policies have supported equity markets.

Away from equities, Brent oil futures eased 0.3% in Asian trading after Monday's 1.3% gain. And bitcoin's price has risen to about $11,450, according to CoinDesk, as it continued to rebound from early February's low of $5,947.

Write to Kenan Machado at kenan.machado@wsj.com

(END) Dow Jones Newswires

February 20, 2018 01:59 ET (06:59 GMT)

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