Asian markets were mixed Thursday as this week's global rally ran out of juice, with concerns about a huge oil output cut's impact on inflation tempering hopes that central banks could soon ease back on their rate hike campaigns.
The mood on trading floors has been a little lighter this week, sending equities surging and weighing on the dollar, after weak readings on US factory activity and job openings feeding speculation that the Federal Reserve's strict tightening drive was having an effect.
But the confidence took a knock Wednesday from a better-than-expected read on private jobs hiring and a report showing the key services sector holding up more than expected.
The figures highlighted the resilience of the US economy in the face of multiple rate hikes and point to the long road ahead for the Fed in fighting decades-high inflation.
Fed officials have lined up for weeks to insist that they will not budge from lifting borrowing costs until prices are tempered -- even at the cost of a recession -- while some have warned traders not to expect any cuts next year.
"After an increase in expectations of an imminent Fed pivot given the softer than expected US (factory data), the strength in the services (sector) not only eases concerns of an imminent US recession, it also refutes any notion that the Fed will look to take its foot off the tighten pedal any time soon," said National Australia Bank's Rodrigo Catril.
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The latest US data came as OPEC and other major producers led by Russia had decided to slash output by a massive two million barrels a day -- the biggest reduction since the pandemic struck.
Moscow said a possible price cap by the European Union on Russian crude would have a "detrimental effect" on the global oil sector, saying Moscow would not sell to countries that introduced it.
The news gave already elevated oil prices another leg up, with both contracts piling on more than one percent, and fuelling concerns that energy costs -- a major driver of the spike in global inflation since Russia's Ukraine invasion -- will drive higher again.
"All the developments we have seen on the supply side at this point very much sets the stage for what we believe will be higher prices into the end of this year," Damien Courvalin, at Goldman Sachs, told Bloomberg Television.
"With this cut and the winter seasonal demand, inventories will continue to fall."
All three main indexes on Wall Street ended in the red, though they managed to claw back most of their earlier losses thanks to a late rally, though Asian markets fared a little better.
Tokyo, Singapore, Seoul, Taipei and Jakarta all rose again, but Hong Kong retreated after blasting almost six percent higher Wednesday. Sydney, Wellington and Manila were also slightly lower.
But commentators remained on guard over the outlook, with eyes now on the release of US non-farm payroll jobs on Friday, warning that an above-forecast reading could spark another major selloff.
On currency markets the dollar, which bounced Wednesday after suffering a sell-off for most of the week, was slightly down again in Asian business.
Even sterling managed to resume its gains despite news that Fitch had lowered the outlook for British debt from stable to negative after the government of new Prime Minister Liz Truss announced a mini-budget packed with debt-fueled tax cuts.
The pound plunged more than two percent earlier as Truss failed to reassure investors with a speech at her Conservative party conference where she insisted she would stick to her fiscal plan.
Key figures around 0230 GMT
Tokyo - Nikkei 225: UP 0.9 percent at 27,370.37 (break)
Hong Kong - Hang Seng Index: DOWN 0.6 percent at 17,983.43
Shanghai - Composite: Closed for a holiday
Pound/dollar: UP at $1.1353 from $1.1326 on Wednesday
Euro/dollar: UP at $0.9910 from $0.9889
Euro/pound: DOWN at 87.27 pence from 87.29 pence
Dollar/yen: UP at 144.65 yen from 144.59 yen
West Texas Intermediate: UP 0.2 percent at $87.92 per barrel
Brent North Sea crude: UP 0.2 percent at $93.55 per barrel
New York - Dow: DOWN 0.1 percent at 30,273.87 (close)
London - FTSE 100: DOWN 0.5 percent at 7,051.60 (close)