With crucial inflation data out of the United States due at the end of the week, investors are largely playing a waiting game, with many inclined to sell after a recent run-up.
However, a forecast-beating read on consumer confidence in the world's top economy dented hopes that the Federal Reserve will have room to cut borrowing costs this year, while the mood was also soured by a weak Treasury sale that saw yields push higher.
Meanwhile, US central bank official Neel Kashkari warned that decision-makers had not ruled out a possible hike if they continue to struggle to bring prices down to their two percent target.
Wall Street's three main indexes ended mixed on their first day after a long weekend, with sentiment clouded by the government bond sale and the Conference Board gauge of May consumer confidence.
"The reading is still weak, being much closer to the bottom than the top of its past 10 years range. Nevertheless, this data point is the second successive upside surprises in the releases," said Ray Attrill of National Australia Bank.
Minneapolis Fed chief Kashkari said Tuesday that while monetary policy remained tight -- rates are at two-decade highs -- "I don't think anybody has totally taken rate increases off the table".
"I think the odds of us raising rates are quite low, but I don't want to take anything off the table."
His comments come after several other Fed officials said they were cautious about cutting too soon and wanted to see more data proving inflation was coming back down to two percent.
"I can tell you this, it certainly won't be more than two cuts," he warned.
Investors are now pricing in one cut before the year's end -- compared with as many as six tipped in January.
Chris Low, of FHN Financial, said policymakers were "looking for multiple good inflation reports, and by good, people like governor Christopher Waller imply they should be mostly better even than April, let alone any of the months of the first quarter."
He expected the reduction to come in November or December.
All eyes are now on the release of the personal consumption expenditures (PCE) index -- the Fed's preferred gauge of inflation. That comes after figures showed consumer prices eased in April after three straight forecast-topping readings.
The next policy decision is due next month.
Asian investors shifted nervously Wednesday and markets fell across the region, with Hong Kong leading the losses owing to heavy selling in Chinese tech firms.
Tokyo, Sydney, Seoul, Singapore, Mumbai, Taipei, Manila, Bangkok, Wellington and Jakarta were all in the red.
London, Paris and Frankfurt also retreated.
Shanghai edged up as the International Monetary Fund lifted its forecast for Chinese economic growth to five percent in light of recent policy announcements. That is up from its previous estimate of 4.6 percent.
Oil prices rose again on geopolitical concerns after a bulk carrier was attacked in the Red Sea, a key waterway for shipping and particularly crude.
The strike comes amid heightened concerns about tensions in the region and as Israeli forces continue a ground invasion of Rafah in southern Gaza.
Also on traders' minds is the upcoming meeting of OPEC and other key oil producers that is expected to see them rollover output cuts.
Still, Warren Patterson, of ING Groep, said: "Geopolitical tensions continue to overshadow the market, but until we see supply losses, I think upside is limited.
"We need to see confirmation of a full rollover of cuts for the market to move significantly higher."
- Key figures around 0810 GMT -
Tokyo - Nikkei 225: DOWN 0.8 percent at 38,556.87 (close)
Hong Kong - Hang Seng Index: DOWN 1.8 percent at 18,477.01 (close)
Shanghai - Composite: UP 0.1 percent at 3,111.02 (close)
London - FTSE 100: DOWN 0.3 percent at 8,232.62
Dollar/yen: DOWN at 157.13 from 157.14 yen on Tuesday
Euro/dollar: DOWN at $1.0852 from $1.0862
Pound/dollar: DOWN at $1.2762 from $1.2763
Euro/pound: DOWN at 85.02 from 85.09 pence
West Texas Intermediate: UP 0.5 percent at $80.20 per barrel
Brent North Sea Crude: UP 0.4 percent at $84.52 per barrel
New York - Dow: DOWN 0.6 percent at 38,852.86 (close)
dan/mtp
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