Asian share markets were in full retreat on Wednesday as a relentless slide in oil prices soured an attempted rally on Wall Street and dealt a further blow to global investors' appetite for riskier assets.

U.S. crude wallowed at its lowest since 2003 after the world's energy watchdog warned the market could "drown in oversupply". U.S. crude futures shed 53 cents to $27.93, while Brent crude lost 24 cents to $28.52 a barrel.

Equity markets reacted by surrendering all of Tuesday's rare gains. MSCI's broadest index of Asia-Pacific shares outside Japan sank 2.1 percent to reach depths not seen since late 2011.

READ: US crude hits new 12-year low below $28

Japan's Nikkei fell 2.2 percent, leaving it 20 percent below last year's peak and so meeting the technical definition of a bear market.

The pain was felt widely with Australian stocks down 0.8 percent and South Korea off 2 percent.

Chinese markets fared only a little better amid mounting talk that more stimulus may be on the way, possibly before the Lunar New Year holidays in early February.

December factory output, investment and retail sales data released on Tuesday were all weaker than expected.

The CSI300 index fell 1 percent, having rallied over 3 percent on Tuesday. The Shanghai Composite Index eased 0.8 percent.

The government-backed China Securities Journal reported that Beijing had the policy space for further easing to support the economy, including raising deficit spending to around 3 percent of annual economic output.

China's central bank late Tuesday did reveal it would inject more than 600 billion yuan ($91.22 billion) into the banking system to help ease a liquidity squeeze expected before the long Lunar New Year celebrations.

Yet such a move is usual before the holidays and stopped well short of an actual cut in bank reserve ratios.

Wall Street had seen its early gains erased by the slump in U.S. crude. The Dow ended Tuesday up 0.17 percent, while the S&P 500 rose a single point and the Nasdaq eased 0.26 percent.

The S&P energy sector alone dived 2.17 percent. Oil at 12-year lows stokes fears of deeper losses for energy companies and the risk some may fail to pay their debts.

Tom Porcelli, chief U.S. economist at RBC Capital Markets, noted that polls of investors showed investors were more bearish on Wall Street than at any time since mid-1987.

"Perhaps characterizing the recent bout of negativity as being 'pervasive' is an understatement," he wrote in a note.

Yet history showed that sentiment was darkest before the dawn.

"When investor pessimism reached these levels outside of an economic recession, the market was higher one quarter hence in every single instance, and up by an average of 6.4 percent."

With risk out of favor, sovereign bonds were in demand. Yields on U.S. 10-year Treasuries declined to 2.03 percent and were down a massive 24 basis points since the new year began.

Other safe havens included the Japanese yen, which rose across the board. The dollar was dragged back to 117.14 yen from a top of 118.11 on Tuesday, while sterling hit its lowest since early 2014.

The pound had already been under fire after Bank of England Governor Mark Carney said he had no "set timetable" for raising rates, sending it to a seven-year low of $1.4127.

Against a basket of currencies, the U.S. dollar was down just a touch at 98.919, while the euro edged up to $1.0938.