Stocks fell Thursday ahead of much-anticipated US inflation data, which comes against a backdrop of renewed concerns that the Federal Reserve could announce another interest rate hike before the end of the year.
The feel-good factor that characterised much of July has given way to uncertainty about the US central bank's plans following a mixed jobs report and warnings from policymakers that more was needed to finally get prices under control.
Ongoing weakness in China's economy -- and lack of concrete action by authorities to address it -- are also taking their toll on investor sentiment, helping to drive a retreat in global markets in recent weeks.
All eyes are on the release later Thursday of the US consumer price index for last month, a closely watched gauge of inflation that plays a key role in the Fed's decision-making on monetary policy.
While rate hikes have dampened steep price rises -- from a four-decade high of 9.1 percent in June last year to three percent now -- observers warned officials would find it harder to get inflation back down to its two percent target.
After falling for 12 straight months, forecasts are for a slight uptick in the CPI, partly because of rising oil costs.
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However, core inflation is tipped to ease again, which commentators said should allow the Fed to stand pat on rates at its next meeting in September.
The bank hiked in July but indicated that could be the last such move, after more than a year of tightening.
Fawad Razaqzada, at City Index and Forex.com said a "small beat" would be tolerable for investors.
"A goldilocks outlook in the US is what stock market investors on Wall Street have been enjoying this year -- until the recent weakness," he said in a note.
"They will be looking for signs that the health and sentiment of the consumer remains positive, enough not to increase the risks of a further Fed rate increase, and yet not too depressing to raise recession alarm bells."
All three main indexes on Wall Street ended in the red Wednesday, dragged by tech firms, and Asia largely followed suit.
Hong Kong, Sydney, Seoul, Singapore, Wellington, Taipei and Manila were all down, though Tokyo, Shanghai and Jakarta edged up slightly.
Investors are keeping tabs on China, hoping for measures to support the ailing economy, after news that the country had slipped into deflation for the first time in more than two years and exports plunged at their fastest pace since the early days of the pandemic.
There was also a little nervousness after President Joe Biden signed an executive order directing the Treasury to restrict certain US investments in China in sensitive high-tech sectors including semiconductors, quantum computing and artificial intelligence.
Beijing hit out at the move, saying it "severely disrupts the security of global industrial and supply chains".
The order comes even as the two sides try to iron out some differences after years of tensions.
Oil prices dipped slightly but held their recent gains, with both main contracts at multi-month highs, on worries about Russian supplies following a Ukrainian attack on one of the country's tankers.
Output cuts by Moscow and OPEC giant Saudi Arabia were also providing strong support to the market, analysts said.
Key figures around 0230 GMT
Tokyo - Nikkei 225: UP 0.4 percent at 32,338.95 (break)
Hong Kong - Hang Seng Index: DOWN 0.6 percent at 19,163.41
Shanghai - Composite: UP 0.1 percent at 3,248.13
Euro/dollar: UP at $1.0978 from $1.0975 on Wednesday
Pound/dollar: DOWN at $1.2718 from $1.2720
Euro/pound: UP at 86.30 from 86.26 pence
Dollar/yen: UP at 143.80 yen from 143.38 yen
West Texas Intermediate: DOWN 0.3 percent at $84.17 per barrel
Brent North Sea crude: DOWN 0.3 percent at $87.32 per barrel
New York - Dow: DOWN 0.5 percent at 35,123.36 (close)
London - FTSE 100: UP 0.8 percent at 7,587.30 (close)