Asian markets struggled Tuesday to extend a Wall Street and European rally as traders nervously await US inflation data, while lingering concerns about China's economy remain a millstone.
The consumer price index report is one of the key indicators that help guide the Federal Reserve's policy decision-making, and next week's meeting is expected to see officials hold interest rates, its statement will be pored over for its thinking for the future.
Equities have struggled so far this month on concerns that recent figures pointing to a resilient economy and jobs market will pressure the bank to tighten once more this year as it looks to defeat inflation.
That has been compounded by mixed signals from Fed officials, with some pushing for another hike and others saying it would be best for the economy to wait and see the effects of more than a year of lifting.
With boss Jerome Powell insisting that choices would be based on incoming data, investors have taken weak economic readings as being good news for the rates outlook.
"This week is more likely to be a 'good news is good, bad news is bad' story," said Chris Larkin, managing director of trading and investing at E*Trade from Morgan Stanley.
"The market’s ability to rebound in the near term could hinge on this week’s inflation numbers, especially Wednesday’s CPI."
A group of leading economists at some of the world's biggest banks said they did not expect the Fed would hike again and would begin slashing borrowing costs in the new year, while they also predicted the United States would avoid a recession.
"Given both demonstrated and anticipated progress on inflation, the majority of the committee members believe the Fed’s tightening cycle has run its course," said Simona Mocuta, chair of the 14-member American Bankers Association’s Economic Advisory Committee.
The grouping includes economists from banking titans including JPMorgan Chase, Morgan Stanley and Wells Fargo, and its reports are often read by Powell and other decision-makers at the Fed.
All three main indexes on Wall Street enjoyed healthy gains thanks to a surge in tech firms, but Asia again stuttered.
Tokyo, Taipei and Manila edged up but Hong Kong, Shanghai, Seoul, Sydney, Singapore, Wellington and Jakarta were all down.
China worries continue to dampen buying sentiment, even after small signs of improvement in the world's number two economy, including a return to inflation and smaller-than-expected drop in exports and imports.
And while the government has announced a series of measures to kickstart growth and support the property sector, it is facing calls to unveil a blockbuster stimulus along the lines of that seen in 2008 during the global financial crisis.
On currency markets, the yen weakened slightly against the dollar, having enjoyed a much-needed bounce on comments from the Bank of Japan's head suggesting it could begin moving away from its ultra-loose monetary policy.
- Key figures around 0230 GMT -
Tokyo - Nikkei 225: UP 0.6 percent at 32,665.71 (break)
Hong Kong - Hang Seng Index: DOWN 0.3 percent at 18,035.08
Shanghai - Composite: DOWN 0.1 percent at 3,139.42
Dollar/yen: UP at 146.65 yen from 146.56 yen on Monday
Euro/dollar: DOWN at $1.0746 from $1.0752
Pound/dollar: UP at $1.2513 from $1.2511
Euro/pound: UP at 85.89 from 85.87 pence
West Texas Intermediate: UP 0.3 percent at $87.59 per barrel
Brent North Sea crude: UP 0.3 percent at $90.87 per barrel
New York - Dow: UP 0.3 percent at 34,663.72 (close)
London - FTSE 100: UP 0.3 percent at 7,496.87 (close)
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