Asian stocks mostly fell Monday as traders struggled to maintain momentum from last week's rally, though Shanghai advanced as mainland Chinese markets reopened after a week-long Lunar New Year break.
Even a strong performance on Wall Street was not enough to lift sentiment across the region, after data showed the Federal Reserve's preferred gauge of inflation rose in December at its slowest pace in more than a year.
The reading saw dealers ramp up bets on the central bank lifting interest rates this week by just 25 basis points, down from the half-point hike last month, which followed four straight 75-point increases.
The European Central Bank and Bank of England are also due to announce decisions this week.
The meetings come as a string of recent data suggests that last year's monetary tightening campaign by policymakers was beginning to kick in, as price rises begin to slow from their multi-decade highs.
There remains trepidation on trading floors that economies could still slip into recession, while a mixed earnings season so far has also caused concern about company profits.
US Treasury Secretary Janet Yellen said that while she was pleased to see inflation coming down, she remained wary about the economic outlook.
"I'm reasonably satisfied by the data that I've seen so far, but I don't want to minimise the risk of recession" owing to the Fed's rate hikes "slowing down the economy", she told Bloomberg News.
That worry was offsetting optimism in Asia about a strong recovery in China this year, as it emerges after the lifting of painful zero-Covid policies.
Signs of strong travel and spending over last week's break added to the upbeat mood, coupled with data showing there was no explosion in Covid cases over that time, suggesting the disease could be under control now.
Shanghai rose as it resumed trading, though it pared big morning gains, while Tokyo was also up and Taipei piled on more than three% thanks to a surge in chipmakers.
Chinese markets are "catching up with the performance of Hong Kong and US markets during the Chinese New Year", said Willer Chen, at Forsyth Barr Asia.
"The market is very excited about the holiday data."
However, Hong Kong sank after enjoying a healthy rally through most of January, while Sydney, Seoul, Singapore, Jakarta, and Manila also slipped. Bangkok and Wellington were barely moved.
"For now stock markets look strong," said Michael Hewson at CMC Markets. "However this week could well be the pin that pops this month's rally and injects a dose of realism into market expectations.
"Whether it's the Federal Reserve, or the European Central Bank, the market could well get delivered a few home truths by central bankers later this week."
Mumbai was in the red as firms linked to tycoon Gautam Adani's business empire failed to hold big early rebounds from last week's massive losses, which wiped out almost $45 billion from their valuations.
Adani's firms have suffered big selling after US investment group Hindenburg Research alleged "brazen stock manipulation and (an) accounting fraud scheme over the course of decades".
The conglomerate hit back saying it was the victim of a "maliciously mischievous" reputational attack and late Sunday issued a 413-page statement that it said rebutted the claims.
Oil prices dipped even with demand expectations rising as China emerges from years of strict Covid controls, while traders brushed off news of a drone strike on an Iranian defence ministry site.
"While oil prices opened higher on the headlines, the risk to global supply seems relatively limited at present," said SPI Asset Management's Stephen Innes.
"Iran's oil production facilities are located primarily in the southwest of the country and were not targeted in the current strikes.
"Iran is a marginal global crude exporter, and any significant disruption could be offset by newly-created OPEC spare capacity."
- Key figures around 0610 GMT -
Tokyo - Nikkei 225: UP 0.2% at 27,433.40 (close)
Hong Kong - Hang Seng Index: DOWN 2.4% at 22,142.03
Shanghai - Composite: UP 0.1% at 3,269.32 (close)
Dollar/yen: DOWN at 129.62 yen from 129.80 yen on Friday
Euro/dollar: DOWN at $1.0860 from $1.0874
Pound/dollar: DOWN at $1.2390 from $1.2395
Euro/pound: UP at 87.67 pence from 87.65 pence
West Texas Intermediate: DOWN 0.4% at $79.33 per barrel
Brent North Sea crude: DOWN 0.4% at $86.08 per barrel
New York - Dow: UP 0.1% at 33,978.08 (close)
London - FTSE 100: FLAT at 7,765.15 (close)