TOKYO: Asian stocks were cautiously up on Wednesday as benign inflation data in China and more gloom in the euro zone economy lent credence to fears of a faltering global economic recovery.
The dollar steadied after disappointing data out of Germany and Britain checked the euro's recent bounce.
"News of a very large drop in German business confidence reinforces concerns about the European economy," Ric Spooner, chief market analysts at CMC Markets in Sydney, said in a note to clients.
"Problems in Europe are an ongoing headwind for other major economies including the US, and China is a negative for world growth."
Data showing China's consumer inflation slowing to a level not seen since 2010 did little to improve the mood, with MSCI's broadest index of Asia-Pacific shares outside Japan gaining a modest 0.1 percent - still within reach of seven-month lows hit at the start of the week.
China's annual consumer inflation eased to 1.6 percent in September against expectations of 1.7 percent, adding to concerns the economy continues to lose momentum despite a raft of stimulus measures.
Tokyo's Nikkei climbed 0.1 percent after touching a two-month trough on Tuesday.
Concerns over faltering global growth triggered a bruising selloff in global equity markets in the past week, and investors remain reluctant to buy into riskier assets as the drumbeat of weak data showed no signs of abating.
Underscoring the worries over growth, South Korea's central bank cut its policy interest rate for the second time in three months.
Overnight, a closely watched ZEW survey showed German analyst and investor morale fell below zero for the first time in nearly two years in October.
Adding to the gloom, the German government cut its growth forecasts, euro zone industrial production fell, British inflation slowed sharply in September and Fitch warned it may cut France's credit rating.
"Risk-off tone continues to dominate the markets as US equities pared most of the gains while Treasuries remain in demand," Credit Argricole said in a note to clients.
US Treasuries and German Bunds have rallied this week, with the yields on the latter hitting record lows on Tuesday after data reinforced fears the euro zone may be slipping into recession.
Wall Street put up a mixed performance overnight, reflecting the cautious mood in markets. The S&P 500 and Nasdaq booked modest gains to break a three-day string of sharp declines, but the Dow finished down for a fourth day.
The dollar index, a gauge of the greenback's strength against a basket of major currencies, was up 0.1 percent at 85.935 as the downbeat data took a toll on the euro.
The dollar edged up 0.1 percent to 107.11 yen, having pulled back from a one-month low of 106.68 hit the previous day.
The euro traded little changed at $1.2640.
In commodities, US crude bounced slightly after posting its biggest percentage loss in about two years overnight on a downgrade in global oil consumption forecasts, projections for another big boost in shale oil and reluctance by OPEC members to cut output.
US crude was up 17 cents at $82.01 a barrel, although mounting evidence of slackening demand and unrelenting US shale output are expected to keep applying downward pressure on the commodity in the mid- to long-term.
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