Asian shares, oil fall
A man passes a board showing the decline of Straits Times Index (STI), Dow Jones Industrial Average (DJIA) and the Standard and Poor's (S&P) index at the central business district in Singapore, January 18, 2016 Reuters

Asian shares retreated and oil prices resumed their descent on Tuesday as investors took profits on rebounds over the last two days as fears of a global economic slowdown showed no sign of abating.

Japan's Nikkei fell 1.8 percent by midday while Hong Kong's Hang Seng Index fell 1.5 percent. Both fell more than 2 percent at one point.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.9 percent after two days of gains since late last week.

"Wherever you look - China, oil and the U.S., there is no clear evidence of improvement in economic fundamentals. So in the near term, it is hard to expect risk asset prices to gain further after a spate of short-covering," said Tatsushi Maeno, managing director at PineBridge Investments.

Crude oil prices have failed to extend their rebound that had started last week, falling around 7 percent so far this week. News that Iraq's output reached a record last month deepened concerns of oversupply.

Oil prices have fallen more than 75 percent from their 2012 peaks as global output was boosted by U.S. shale oil production and demand growth turned tepid, partially caused by the Chinese economy's slowing growth.

The massive price fall is putting huge pressure on profitability of energy firms worldwide, which are in turn slashing investment and cutting jobs.

The U.S. S&P fell 1.6 percent to 1,877.08, led by a 4.5 percent drop in the energy sector.

Brent crude futures, the global benchmark, dropped to $30 a barrel, falling 1.3 percent in Tuesday Asian trade, or 6.5 percent so far this week.

U.S. crude futures fell even more to $29.83 per barrel, down 7.4 percent from late last week.

Countering selling pressure for now are vague hopes that the U.S. Federal Reserve may tone done its bias towards further policy tightening and that the Bank of Japan may expand its stimulus. Both will hold policy reviews this week.

The U.S. Federal Reserve's policy statement is due on Wednesday followed by the Bank of Japan's announcement on Friday.