HONG KONG (AFP)- Asian markets mostly headed into the weekend with losses on Friday (Dec 15) following a sell-off on Wall Street as traders fear US lawmakers will fail to pass much-vaunted tax cuts.

Tokyo's Nikkei was among the biggest losers, even with data showing Japanese business confidence at an 11-year high, while the euro struggled to recover from a disappointing European Central Bank meeting.

Wall Street stocks fell Thursday on reports that Republican senator Marco Rubio was considering voting against a final tax cut deal if certain demands were not met.

The warning comes as at least two other members of his party remain uncertain about how they will vote, putting its wafer-thin majority in peril.

The surprise loss of the Republicans' once-safe Alabama seat this week has added to the sense of fear and once again raises questions about US President Donald Trump's ability to push through his economic agenda.

Hopes he would introduce market-friendly measures such as tax cuts, infrastructure spending and deregulation helped fire a global rally this year, with all three main US indexes hitting multiple records.

But Shane Chanel, equities and derivatives adviser at ASR Wealth Advisers, warned: "Markets are pricing a lot of optimism and usually only one thing happens when there is disappointing news."

"At these multiples, I believe that US markets are pricing in so much optimism that it doesn't leave any room for error."

ELECTION WORRIES

Greg McKenna, chief market strategist at AxiTrader, added: "Things won't get any easier in 2018 as candidates wonder about their electoral chances in the mid-term elections."

Tokyo ended the morning session 0.9 per cent lower as the US dollar fell against the yen on fading hopes for inflation-friendly tax cuts.

That trumped the Bank of Japan's latest quarterly Tankan report showing Japan's biggest manufacturers were the most confident they have been since 2006 as the world's number three economy continues to improve.

Hong Kong sank 1.1 per cent, Shanghai and Singapore each lost 0.5 per cent while Sydney retreated 0.2 per cent.

Taipei and Manila turned lower but Seoul added 0.3 per cent and Wellington 0.2 per cent.

While the US dollar faces headwinds from tax reform concerns, it is holding gains against the euro after the ECB left interest rates on hold, maintained its massive stimulus and offered a dim outlook for inflation over the next two years.

And while the bank hiked its economic growth expectations for the eurozone, boss Mario Draghi indicated borrowing costs would remain low as long as inflation was tepid.