Markets saw a limp start Monday as traders turned more cautious after last week's rally, with eyes on China as speculation grows that officials will unveil a raft of economic stimulus measures.
The Federal Reserve's decision to pause its rate hikes and Beijing's cut in borrowing costs provided a much-needed boost to sentiment, helping push equities higher last week.
While officials have not made any announcements, there is an expectation that officials will provide help for the struggling property sector and measures to kickstart consumer activity, among other things.
"Market expectation of policy stimulus is building," Kinger Lau at Goldman Sachs said.
With the global economy continuing to struggle and key industries still in trouble, world leaders have plenty of work to do, analysts said.
"With all roads leading through China at the start of the week, investors' stimulus excitement could give way to the reality that there are no quick fixes to the property market or youth unemployment," said Stephen Innes at SPI Asset Management.
"Indeed, these areas of the economy could require a lengthy structural overhaul to repair. China needs to drive growth in sectors like technology, education, finance and entertainment, all of which have suffered under the security-focused leadership of Xi Jinping."
After Wall Street closed Friday in the red, Asian traders struggled.
Hong Kong, Shanghai, Singapore, Taipei, Manila, Jakarta and Wellington were all down, though Tokyo eked out a small gain.
On a positive note, hopes for a thaw in China-US relations were boosted as US Secretary of State Antony Blinken held talks with China's top envoy Wang Yi in Beijing on Monday, with a meeting with Xi potentially in the works.
Blinken on Sunday held "candid" discussions for seven and a half hours with Chinese Foreign Minister Qin Gang and agreed to keep up communication as they look to avoid conflict.
A senior US official, speaking on condition of anonymity, said the discussions went beyond the usual talking points, including on Taiwan.
"This was a real conversation," he said.
Traders are also keeping tabs on comments from Fed officials after last week's decision to hold rates.
Several decision-makers lined up Friday to offer their views on the next move as they try to bring inflation down.
Fed board member Christopher Waller said the economy remained robust and that he was against changing the bank's tightening policy because of trouble in the banking system.
Richmond Fed President Thomas Barkin said he was happy to keep hiking if data did not show the labour market remained resilient and inflation sticky.
And Chicago Fed Chief Austan Goolsbee considered last week's decision to skip a hike a "reconnaissance mission, pausing now to scope it out before charging up the hill another time".
Investors will be closely watching Fed chief Jerome Powell's twice-yearly testimony to Congress this week, hoping for clues about the policy board's thinking.
On currency markets the yen continued to struggle after the Bank of Japan on Friday stood pat on its ultra-loose monetary policy.
The unit was wallowing at a 15-year low against the euro, the BoJ decision coming a day after the European Central Bank hiked rates again and warned of more to come.
- Key figures around 0230 GMT -
Tokyo - Nikkei 225: UP 0.1 percent at 33,724.60 (break)
Hong Kong - Hang Seng Index: DOWN 0.9 percent at 19,868.19
Shanghai - Composite: DOWN 0.6 percent at 3,255.01
Euro/dollar: DOWN at $1.0940 from $1.0941 on Friday
Pound/dollar: UP at $1.2820 from $1.2823
Dollar/yen: UP at 141.86 yen from 141.84 yen
Euro/pound: UP at 85.35 pence from 85.30 pence
West Texas Intermediate: DOWN 1.3 percent at $70.97 per barrel
Brent North Sea crude: DOWN 1.4 percent at $75.51 per barrel
New York - Dow: DOWN 0.3 percent at 34,299.12 (close)
London - FTSE 100: UP 0.2 percent at 7,642.72 (close)
dan/aha
