By Chong Koh Ping

International stocks retreated Thursday, after concerns about Covid-19 vaccine distribution helped push major U.S. indexes to their steepest one-day falls since October, and sent a measure of expected volatility soaring.

Hong Kong's Hang Seng Index pulled back 2.5%. South Korea's Kospi Composite, Australia's S&P/ASX 200 and Japan's Nikkei 225 fell between 1.5 and 1.9%.

S&P 500 and Nasdaq-100 futures shed 0.4% and 0.7%, respectively. In another sign of rising risk aversion, the yield on the 10-year U.S. Treasury note dropped below 1% for the first time since Jan. 6, falling to as low as 0.998%, according to Tradeweb, before regaining some ground. Bond yields fall as prices rise.

Tai Hui, chief Asia market strategist at J.P. Morgan Asset Management, said that until Thursday, Asia Pacific markets had risen steadily so far this year. "Investors are asking if this rally has run a little too far, " he said.

Mr. Hui said he expects the run-up to Lunar New Year holidays, which start on Feb. 12, to be a period of consolidation for regional markets, rather than bring further large moves.

In mainland China, the CSI 300, a gauge of the biggest stocks trading in either Shanghai or Shenzhen, declined 2.7%. Container-shipping giant Cosco Shipping Holdings Co. led losses, falling by the maximum daily limit of 10%.

In another sign of jitters in Chinese markets, money-market rates continued to rise. The one-week Shanghai interbank offered rate rose 0.012 percentage point to 2.981%, its highest since 2015, according to FactSet.

Short-term borrowing costs have risen in recent days as the People's Bank of China unexpectedly drained funds from the financial system. Earlier this week a major business newspaper also published remarks by Ma Jun, an adviser to the central bank, who warned of asset bubbles emerging due to loose monetary policy.

Xing Zhaopeng, a China markets economist at ANZ in Shanghai, said outflows from Chinese markets and the central bank's stance had both contributed to the selloffs in Shanghai and Shenzhen. "International investors are cutting their risky positions due to the worry of bubbles, including onshore equities and bonds," Mr. Xing said.

Mr. Hui at J.P. Morgan Asset Management said new pockets of coronavirus outbreaks in China had also dented investor sentiment.

The dollar strengthened against various currencies including the Australian dollar and the Korean won. The WSJ Dollar Index rose 0.18% to 85.68, its highest in more than a month.

Write to Chong Koh Ping at chong.kohping@wsj.com

(END) Dow Jones Newswires

01-28-21 0403ET