Asian investors shifted cautiously Tuesday ahead of the release of key US inflation data that could have a huge bearing on the fate of Federal Reserve interest rate cuts this year.
The tepid performance mirrored an uninspiring day on Wall Street, where the Dow fell after an eight-day winning streak, though a strong showing for Chinese tech firms helped Hong Kong extend a rally that has seen it power around 30 percent higher from its January low.
A recent run of soft US jobs data has lifted spirits on trading floors that the Fed will be able to reduce borrowing costs this year.
However, this week will provide a key test of that optimism with the release of April's consumer price index (CPI) on Wednesday, which follows Tuesday's release of producer prices.
The readings come after forecast-beating figures for the first three months of the year that have seen investors whittle down their expectations for the number of rate cuts -- from six in January to at most two now.
Analysts said a miss in either direction on CPI could have a big impact on markets, with JPMorgan Chase & Co's Andrew Tyler saying "the key risk is a hotter CPI print".
"But upcoming macro data creates a two-tailed risk -- with one tied to stronger-than-expected growth fuelling inflation concerns and the other being weaker growth fuelling either recession or 'stagflation' concerns."
The reports come after a survey by the New York Fed showed inflation expectations among US consumers had climbed to their highest level since November.
Rodrigo Catril at National Australia Bank added: "The CPI is expected to show US inflation slowed slightly in April, and if so, it would add to further evidence that the jump in US inflation at the start of the year was a temporary blip.
"That said, any small deviation from the consensus could trigger a meaningful reaction in markets given the current heightened degree of (sensitivity) around inflation and the outlook for Fed policy."
Asian markets were mixed in Tuesday business, with Hong Kong among the best performers thanks to gains in tech titans including Tencent and Alibaba as they prepare to announce their first-quarter earnings.
The advances followed an 11 percent surge in Tencent's New York-listed shares that led a rally in Chinese tech in the city.
Still, Chris Weston, at Pepperstone Group, warned that "both will need to deliver earnings above consensus results and inspiring guidance, as expectations are high".
Tokyo, Singapore, Taipei and Jakarta also edged up, though Shanghai, Sydney, Seoul, Wellington and Manila slipped.
Tokyo - Nikkei 225: UP 0.1 percent at 38,199.10 (break)
Hong Kong - Hang Seng Index: UP 0.3 percent at 19,166.20
Shanghai - Composite: DOWN 0.1 percent at 3,144.57
Dollar/yen: UP at 156.46 yen from 156.21 yen on Monday
Euro/dollar: DOWN at $1.0785 from $1.0792
Pound/dollar: DOWN at $1.2553 from $1.2555
Euro/pound: DOWN at 85.90 from 85.93 pence
West Texas Intermediate: UP 0.1 percent at $79.21 per barrel
Brent North Sea Crude: UP 0.1 percent at $83.45 per barrel
New York - Dow: DOWN 0.2 percent at 39,431.51 (close)
London - FTSE 100: DOWN 0.2 percent at 8,414.99 (close)
