SYDNEY, NSW, Australia - Early optimism in Asia on Tuesday which sent stocks flying was punctured later by remarks from the CEO of Moderna that vaccines may not be as effective against the Omicron variant, and that it may take months for a new vaccine that would be effective to be developed.

Charalambos Pissouros, head of research at JFD Bank, told CNBC Tuesday the week's moves so far evidenced how sensitive market participants are to Omicron headlines.

"We believe that this will be the main theme for a while more. With that in mind, we are very reluctant to say that market concerns have diminished, and that yesterday's rebound is the beginning of a long-lasting recovery. Any new negative headline has high chances of resulting in another leg of massive selling," Pissouros said.

The Nikkei 225 in Japan, which had been up 1.2 percent in early trading reversed course to dive 462.16 points, or 1.63 percent to close at 27,821.76.

In Hong Kong, the Hang Seng sank 376.98 points or 1.58 percent to 23,475.26.

China's Shanghai Composite ignored the gyrations and finished flat, ahead just 1.19 points or 0.03 percent at 3,563.89.

The Australian All Ordinaries advanced 24.90 points or 0.33 p[recent to 7,587.40.

The U.S. dollar got caned by the majors on the back of fall interest rate yields. The euro cruised to 1.1363 in mid-morning European trading. The British pound rose to 1.3368. The Japanese yen was sharply higher at 112.85. The Swiss franc was in demand at 0.9180.

The Canadian dollar was stronger at 1.2785. The Australian and New Zealand dollars were the laggards, both remaining unchanged at 0.7127 and 0.6823 respectively.

Overnight on Wall Street, the Dow Jones Industrial Average rose 236.6 points, or 0.68 percent, to 35,135.94.

The Nasdaq Composite gained 291.18 points, or 1.88 percent, to 15,782.83.

The Standard and Poor's 500 reclaimed 60.65 points, or 1.32 percent, to 4,655.27.