Asian markets were broadly down in morning trade Tuesday, as investors eyed the Omicron coronavirus variant and looming central bank moves to curb rising inflation.
As policymakers on both sides of the Atlantic contend with soaring inflation, the US Federal Reserve is scheduled to announce its latest interest-rate decision on Wednesday, followed by the European Central Bank (ECB) the next day.
After last week's strong performance, stocks have stumbled this week as Britain became the latest to boost its response to the Omicron strain and China reported its first case of the variant — which many fear could throw the global recovery into jeopardy.
Tracking those fears, Tokyo was down in morning trade, as were Seoul and Sydney. Taipei and Jakarta were slightly up.
Hong Kong fell in the wake of the decision by Chinese artificial intelligence start-up SenseTime to postpone a $767 million initial public offering in the city after a US blacklist over accusations of genocide in Xinjiang.
The news illustrated the risks investors face from competing sanctions as relations between the world's two biggest economies sour.
Coronavirus fears also sent oil prices into retreat, after they gained around eight percent last week.
But all eyes this week are on the Fed, which must carefully calibrate its response between raising rates and pulling the rug from under a tenuous recovery or sticking to the status quo and letting inflation rise even further.
Analysts expect the central bank to plumb for the former, as the United States battles with consumer prices soaring at some of the highest rates in decades.
"The tapering process has become a straightjacket, preventing the Fed from responding to the higher than expected level and persistence of inflation," said Philip Marey, senior US strategist at Rabobank, in a survey response to Bloomberg.
A strong signal for rate hikes in 2022 will put pressure on the ECB as well as the Bank of England — both of which meet Thursday.
Investors are "reluctant to buy stocks ahead of the US Federal Reserve's policy decision", Tokyo's Mizuho Securities said, while Angelo Kourkafas, investment strategist at Edward Jones, pointed to a "little bit of uneasiness, nervousness" about the move.
"Volatility will remain elevated throughout all of this week's rate decisions from the Fed, ECB and BOE," Edward Moya, senior market analyst at Oanda Corp, wrote in a note.
"2022 is still expected to be a strong global growth story, but accelerated central bank hawkishness could be the one thing that helps deliver the first major pullback with U.S. equities."
Key figures around 0220 GMT
Tokyo – Nikkei 225: DOWN 0.4 percent at 28,528.53
Hong Kong – Hang Seng Index: DOWN 0.9 percent at 23735.91
Shanghai – Composite: DOWN 0.4 percent at 3,665.26
New York – Dow: DOWN 0.9 percent at 35,650.95 (close)
London – FTSE 100: DOWN 0.8 percent at 7,231.44 (close)
Euro/dollar: DOWN at 1.1280 from $1.1289 Friday
Pound/dollar: DOWN at 1.3202 from $1.3216
Euro/pound: UP at 85.44 pence from 85.40 pence
Dollar/yen: UP at 113.62 from 113.58 yen
Brent North Sea crude: DOWN 0.3 percent at $74.18 per barrel
West Texas Intermediate: DOWN 0.3 percent at $71.08 per barrel