Asian markets drifted Tuesday as investors bided their time ahead of a key Federal Reserve policy decision later in the week, while data showing a bounce in Chinese economic activity failed to excite.
After spending most of January chalking up gains owing to easing concerns over inflation and interest rates, traders have this week taken a step back with recession talk still filling the air.
The Fed is due Wednesday to announce another rise in borrowing costs, with expectations for a 25 basis-point lift marking a further slowdown in its monetary tightening campaign.
The post-meeting statement and comments from bank boss Jerome Powell will be pored over for an idea about officials' thinking on future hikes.
Investors are already speculating that slowing inflation could allow for a possible rate cut towards the year's end, even though several policy board members have consistently pushed back against such a move, insisting they will not let up until prices are under control.
Decisions by the Bank of England and European Central Bank are also on the agenda this week.
All three main indexes on Wall Street tumbled, with the Nasdaq off two percent and the less upbeat mood on trading floors saw Monday's apathetic trade continue in Asia.
Hong Kong, Tokyo and Shanghai were flat, while Wellington, Taipei, Manila and Jakarta fell.
Seoul was dragged by a sharp fall in Samsung, which said fourth-quarter operating profits plunged nearly 70 percent, the biggest drop in more than eight years, as electronics and chips sales tanked.
"The January rally has hit a wall and probably won't have a chance of returning until we get beyond Wednesday's Fed press conference and Apple's results after the Thursday close," said OANDA's Edward Moya.
Traders shrugged at data showing China's factory activity expanded in January after four months of contraction as the economy reopened from years of strict zero-Covid curbs.
While the news was welcome, National Bureau of Statistics statistician Zhao Qinghe warned there were still "many manufacturing and services firms that reported insufficient market demand in January, which is still the biggest problem faced by firms".
"The economy's recovery foundation needs to be further solidified."
Still, the International Monetary Fund said it saw the global economy picking up this year, citing strong consumption and investment, and China's emergence from Covid restrictions.
In its World Economic Outlook report it said "adverse risks have moderated" since October's forecast.
And its chief economist Pierre-Olivier Gourinchas told reporters: "The year ahead will still be challenging... but it could well represent a turning point with growth bottoming out and inflation declining."
Oil prices ticked up but made only a little headway after dropping around two percent Monday as traders fretted over the upcoming policy decisions, while OPEC and its allies will discuss their production policy this week.
"The Fed is certainly the main driver of sentiment this week," Vandana Hari, of Vanda Insights, said. "Crude continues to track the broader financial markets as supply-demand fundamentals appear largely balanced."
- Key figures around 0230 GMT -
Tokyo - Nikkei 225: FLAT at 27,429.59 (break)
Hong Kong - Hang Seng Index: FLAT at 22,063.07
Shanghai - Composite: FLAT at 3,268.44
Dollar/yen: DOWN at 130.11 yen from 130.43 yen on Monday
Euro/dollar: DOWN at $1.0851 from $1.0854
Pound/dollar: UP at $1.2359 from $1.2353
Euro/pound: DOWN at 87.82 pence from 87.84 pence
West Texas Intermediate: UP 0.1 percent at $77.98 per barrel
Brent North Sea crude: UP 0.3 percent at $85.18 per barrel
New York - Dow: DOWN 0.8 percent at 33,717.09 (close)
London - FTSE 100: UP 0.3 percent at 7,784.87 (close)