Fall in US factory activity rattles Asia Tuesday 02:30 GMT. Asian stocks lost ground as an unexpected contraction in US manufacturing activity renewed concerns about prospects for the global economy. The MSCI Asia Pacific index inched down 0.1 per cent, retreating after four days of gains, with Japan's Nikkei 225 Stock Average off 0.4 per cent, South Korea's Kospi composite index down 0.5 per cent and Australia's S&P/ASX 200 index 0.2 per cent lower. Hong Kong's Hang Seng index slipped 0.1 per cent and China's Shanghai Composite index lost 0.3 per cent. Sentiment was hurt after US manufacturing activity unexpectedly shrank in November to its lowest level in more than three years. The Institute for Supply Management said on Monday that its index of national factory activity fell to 49.5 amid concerns over the looming US fiscal cliff of automatic spending cuts and tax rises, which could push the economy into recession. Analysts at Capital Economics said the drop in the ISM manufacturing index back below the supposed break-even level of 50 for the first time since July - indicating a contraction - "may be a result of the uncertainty generated by the fiscal cliff." "As such, this survey may indicate that businesses are concerned enough about the fiscal cliff to put spending and hiring decisions on hold," the analysts said in a note to clients. Uncertainty over the prospects of a budget compromise persisted as the White House dismissed a proposal from Republicans on Monday that included tax reforms and spending cuts, saying it was against President Barack Obama's pledge to raise taxes on the wealthiest Americans. That, combined with Eurozone PMI - which improved slightly in November but remained below 50, recording its 16th consecutive month of contraction - kept investors nervous. Australian miners were among the worst performers in the region as demand worries re-emerged. BHP Billiton slid 0.4 per cent and PanAust shed 1.8 per cent. Investors are awaiting a policy decision by the Reserve Bank of Australia due later on Tuesday, expecting the central bank to cut interest rates by 25 basis points to 3.0 per cent to boost the economy. GrainCorp climbed 3.2 per cent after Archer-Daniels-Midland sweetened its offer for the Australian grain handler. Asian exporters also retreated. Automakers in Japan came under pressure after November sales updates, with Toyota Motor slipping 0.3 per cent and Nissan Motor dropping 1.6 per cent. Technology companies were also lower with Hitachi down 1.5 per cent and camera-maker Nikon off 1.5 per cent. Bucking the trend, Sharp jumped 1.7 per cent on a Nikkei report that it plans to link up with Qualcomm to develop an energy-efficient LCD smartphone panel. In Seoul, technology giant Samsung Electronics lost 0.5 per cent while Hyundai Motor retreated 0.7 per cent despite gains in November sales both in the US and in Korea. Steelmaker Posco declined 1.7 per cent after it was named a preferred bidder for a stake in an iron-ore mining company in Canada, controlled by ArcelorMittal. In Hong Kong, Esprit Holdings fell 1.2 per cent and Foxconn International Holdings lost 1.3 per cent. In Singapore, Olam International climbed 4.4 per cent as Temasek, Singapore's state investment agency, backed a rights issue by the agricultural group following accusations from shortseller Muddy Waters. Earlier, the FTSE All-World equity index pared initial gains and remained little changed as Wall Street's S&P 500 slipped 7 points to 1,409, the latter's opening bounce erased by the poor US manufacturing data. The FTSE Eurofirst 300 added 0.2 per cent. The euro rose 0.5 per cent to $1.3053, gaining brief support from news that Spain has formally requested bank bailout funds, while shrugging off last week's late downgrade of the bloc's rescue funds and absorbing news of Greece's bond buyback proposal. Gold edged lower $1,715 an ounce. Other central bank activity will be in focus this week, with the European Central Bank and the Bank of England delivering their latest monetary policy decisions on Thursday. Additional reporting by Jamie Chisholm in London