TOKYO (AP) - Asian shares mostly fell in muted trading Tuesday as investors awaited decisions on interest rates and earnings reports from around the world.

Traders were awaiting the U.S. Federal Reserve's decision on interest rates, expected on Wednesday. They also were watching for indicators on the Chinese economy, the region's key engine for growth.

A survey released Tuesday showed Chinese factory activity rebounded in January, adding to signs the world's second-largest economy might be recovering from a painful slump.

Japan's benchmark Nikkei 225 fell 0.4% to finish at 27,327.11. Australia's S&P/ASX 200 edged down nearly 0.1% to 7,476.70. South Korea's Kospi declined nearly 1.0% to 2,426.51. Hong Kong's Hang Seng lost 1.6% to 21,718.24, while the Shanghai Composite shed 0.4% to 3,257.15.

"China's rapid reopening has boosted its domestic growth outlook, Europe's mild weather has sharply reduced its recession risk, and a string of better inflation news has increased hopes that the Fed may be able to engineer a 'soft landing' in the U.S.," said Stephen Innes, managing partner at SPI Asset Management.

"Despite these shifts, U.S. recession risk remains a major worry and may be the most significant risk to the global cyclical picture," he said.

Shares fell Monday on Wall Street. The S&P 500 dropped 1.3% to 4,017.77, giving back some of the gains that had carried it last week to its highest level since early December. The Dow Jones Industrial Average fell 0.8% to 33,717.09, while the Nasdaq composite sank 2% to 1,393.81.

Markets have been veering recently on worries that the economy and corporate profits may be set for a steep drop-off, along with competing hopes that cooling inflation will get the Federal Reserve to take it easier on interest rates.

The central bank's next decision on rates is coming Wednesday, and most investors expect it to announce an increase of just 0.25 percentage points. That would be the smallest increase since March, following a spate of hikes of 0.75 points and then a 0.50-point increase, and it would mean less added pressure on the economy.

Higher rates combat inflation by intentionally slowing the economy, while also dragging down on prices for investments. Inflation has been cooling since the summer amid last year's blizzard of rate hikes, but the economy has also been showing signs of concern.

The big question is whether Fed Chair Jerome Powell on Wednesday afternoon will give markets what they want to hear - hints that rate hikes will end soon and rate cuts may even be possible late this year - or stick to the Fed's mantra that it plans to keep rates higher for longer, even if a modest recession hits.

Central banks for Europe and for the United Kingdom are also set to announce their latest increases for rates this week.

Beyond interest rates, more than 100 companies in the S&P 500 are scheduled this week to report how much profit they made in the last three months of 2022. Among them are tech heavyweights Apple, Amazon, and Google's parent company. Because these companies are three of the four biggest on Wall Street by market value, their stock movements carry much more sway on the S&P 500 than others.

Apple's 2% drop Monday, for example, was the heaviest weight on the S&P 500.

Later this week, the U.S. government will also give its latest monthly update on the job market. Hiring has remained resilient across the broad economy, even as housing and other corners weaken sharply under the weight of all the Fed's rate hikes from last year.

Some big tech companies have announced high-profile layoffs after acknowledging they misread their boom coming out of the pandemic. But job cuts may be starting to spread to other areas of the economy. Hasbro and 3M last week announced layoffs.

Economists expect Friday's report to show that U.S. employers added 187,500 more jobs than they cut during January. That would be a slowdown from December's hiring of 223,000.

In energy trading, benchmark U.S. crude dropped 45 cents to $77.45 a barrel in electronic trading on the New York Mercantile Exchange. It gave up $1.78 on Monday to $77.90 per barrel.

Brent crude, the international standard, shed 25 cents to $84.65 a barrel.

In currency trading, the U.S. dollar inched down to 130.26 Japanese yen from 130.43 yen. The euro cost $1.0841, down from $1.0852.

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Yuri Kageyama is on Twitter https://twitter.com/yurikageyama

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