Most markets were mixed in Asia on Tuesday as traders struggled to track a record-breaking day on Wall Street, with the Federal Reserve's next policy meeting later this week in focus.
With coronavirus vaccines rolling out and businesses reopening in many countries, investors are broadly upbeat about the outlook for the global economy while fears have eased that an expected spike in inflation will force central banks to taper their ultra-loose monetary policies.
The release of data last week showing US consumer prices jumped far more than forecast was taken in stride, suggesting a growing acceptance of the Fed's insistence that spikes were to be expected owing to last year's low base of comparison and supply bottlenecks, among other things.
That puts the Fed's latest meeting — and boss Jerome Powell's comments — firmly in the spotlight with dealers looking for an idea about its plans for policy in light of the US economy's blockbuster recovery.
Several observers have warned that its pledge to not start tightening until unemployment is tamed and inflation is running persistently hot could backfire if the economy overheats, which could force it to hike interest rates at a sharper pace.
"We're in a tug-of-war between the understanding that we're having great economic growth and great earnings growth juxtaposed with the fact that we need to get our head wrapped around what inflation looks like and what it will mean both to profit margins and to the Fed," said Art Hogan, chief strategist at National Securities.
The S&P 500 and Nasdaq both clocked record highs Monday, while London's FTSE hit a 2021 peak, despite expectations the UK government would delay lifting its remaining lockdown restrictions. The move was confirmed later in the day.
But trading floors remain nervous places as governments in parts of the world are still battling to overcome the virus and more transmissible variants, which are either forcing them to delay reopenings or reimpose fresh containment measures.
Hong Kong fell more than one percent as investors returned from a long weekend, with eyes on a nuclear plant across the border in China following a US report of a potential leak. Energy firms were also being weighed after Chinese President Xi Jinping ordered safety checks across the country following a massive fatal gas explosion in Hubei province.
Shanghai, Seoul, Manila, and Jakarta also slipped, though there were gains in Tokyo, Sydney, Singapore, Wellington and Taipei.
Bitcoin held above $40,000 after Elon Musk said at the weekend that Tesla would start accepting the unit again once it is mined more ecologically, while it also got a boost from top hedge fund manager Paul Tudor Jones, who endorsed it as a good hedge against inflation.
However, Marc Odo of Swan Global Investments said: "These days, bitcoin's market pivots on what Elon Musk tweets — for me, that's not a great indicator. It's like some billionaire's whim.
"I don't think there's anything fundamentally moving bitcoin one way or the other, other than rumours and tweets. That's not an asset class I want to be involved with."
Key figures at 0230 GMT
Tokyo – Nikkei 225: UP 0.7 percent at 29,375.94 (break)
Hong Kong – Hang Seng Index: DOWN 1.1 percent at 28,540.03
Shanghai – Composite: DOWN 0.8 percent at 3,560.12
Euro/dollar: UP at $1.2126 from $1.2124 at 2050 GMT
Pound/dollar: UP at $1.4111 from $1.4107
Euro/pound: UP at 85.93 pence from 85.91 pence
Dollar/yen: UP at 110.10 yen from 110.08 yen
West Texas Intermediate: UP 0.1 percent at $70.95 per barrel
Brent North Sea crude: UP 0.1 percent at $72.93 per barrel
New York – Dow: DOWN 0.3 percent at 34,393.75 (close)
London – FTSE 100: UP 0.2 percent at 7,146.68 (close)
