With Friday's non-farm payrolls showing the labour market slowing faster than expected, there is a growing worry that the world's top economy is heading for a recession, which sent stocks tumbling.
The Federal Reserve is widely seen cutting rates at next week's meeting but debate surrounds whether it will be 25 or 50 basis points, with some arguing that going for the bigger option could suggest decision-makers are worried.
Analyst Stephen Innes said there were numerous factors that could sway nervous investors ahead of the Fed's decision.
Wednesday's consumer price index is the first major release and a big miss to the downside could ramp up bets on a 50-point cut but add to concerns about the economy.
"While the labour market is cooling, it's far from frozen, and second-quarter GDP was revised up to a solid 3.0 percent annualised gain, keeping the soft-landing narrative firmly on the table," Innes wrote in his Dark Side Of The Boom newsletter.
Still, he added: "For now, the Fed likely won't feel the need to hit the panic button with a jumbo rate cut, but stock traders... haven't fully grasped the depth of the potential labour market weakness yet.
"That leaves the door open for further, potentially sizeable market corrections. Expect the worry meter to creep higher if the employment picture deteriorates further."
And Saira Malik at Nuveen added: "With at least one rate cut by the US Federal Reserve this fall basically a foregone conclusion, financial markets have shifted their focus from bringing down inflation to shoring up economic growth. Market volatility has climbed amid downside surprises in macroeconomic data -- especially labour market indicators."
All three main indexes on Wall Street rose more than one percent Monday after Friday's steep, tech-led retreat.
Hong Kong, Shanghai, Sydney, Singapore, Wellington, Manila, Mumbai and Jakarta edged up but Tokyo, Seoul, Taipei and Bangkok dipped.
Paris and Frankfurt rose in the morning but London was down.
Fresh worries about China's economy are also dampening sentiment, with a mixed bag on trade doing little to encourage investors.
Data showed exports jumped in August but imports fell well short of expectations as the country's leaders struggle to boost consumption.
That came a day after news that inflation rose less than expected in July, reinforcing the view that moves to boost consumer demand and business activity have not taken hold.
China's leaders are now facing pressure to unveil fresh stimulus for the world's number two economy, although they have shown little desire to embark on the bazooka-like spending seen during the global financial crisis.
On currency markets, the dollar strengthened against the yen but the euro edged up ahead of an expected rate cut by the European Central Bank on Thursday.
- Key figures around 0810 GMT -
Tokyo - Nikkei 225: DOWN 0.2 percent at 36,159.16 (close)
Hong Kong - Hang Seng Index: UP 0.2 percent at 17,234.09 (close)
Shanghai - Composite: UP 0.3 percent at 2,744.19 (close)
London - FTSE 100: DOWN 0.4 percent at 8,236.08
Euro/dollar: UP at $1.1043 from $1.1041 on Monday
Pound/dollar: UP at $1.3100 from $1.3075
Dollar/yen: UP at 143.44 yen from 143.11 yen
Euro/pound: DOWN at 84.30 pence from 84.42 pence
West Texas Intermediate: DOWN 0.3 percent at $68.51 per barrel
Brent North Sea Crude: DOWN 0.2 percent at $71.68 per barrel
New York - Dow: UP 1.2 percent at 40,829.59 (close)
dan/dhw
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