Asian stocks were mixed 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 as 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 mutli-decade highs.
But there remains a lot of 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 from its painful period of zero-Covid.
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 rallied as it resumed trading, while Tokyo, Taipei, Jakarta and Wellington also rose, though Hong Kong, Sydney, Seoul, Singapore and Manila slipped.
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."
Oil prices rose on increased demand expectations as China emerges from years of strict Covid controls.
There was little impact on the commodity market from 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."
He added that traders were keeping an eye on developments as any escalation could see disruptions in the key transit point in the Strait of Hormuz. However, he added that observers saw such an issue as being unlikely for now.
- Key figures around 0230 GMT -
Tokyo - Nikkei 225: UP 0.3 percent at 27,473.75 (break)
Hong Kong - Hang Seng Index: DOWN 0.7 percent at 22,533.08
Shanghai - Composite: UP 0.6 percent at 3285.65
Dollar/yen: UP at 130.14 yen from 129.80 yen on Friday
Euro/dollar: DOWN at $1.0871 from $1.0874
Pound/dollar: DOWN at $1.2391 from $1.2395
Euro/pound: UP at 87.75 pence from 87.65 pence
West Texas Intermediate: UP 0.2 percent at $79.87 per barrel
Brent North Sea crude: UP 0.2 percent at $86.60 per barrel
New York - Dow: UP 0.1 percent at 33,978.08 (close)
London - FTSE 100: FLAT at 7,765.15 (close)
dan/dhc
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