HONG KONG: Asian markets fell Thursday as hopes for the global recovery and signs of a possible slowdown in new virus infections play off against the prospect of an end to Federal Reserve largesse and China's regulatory clampdown.
Equities and oil have by and large enjoyed a positive week, helped by US full approval of Pfizer-BioNTech's vaccine and speculation the Fed will take its time in removing its ultra-loose monetary policy whenever it begins to do so.
However, while Wall Street continued to chalk up new records, Asian investors shifted a little more cautiously as they assessed the outlook.
Asian stocks cling to gains as Fed taper worries ease
Top of the agenda this week is Fed boss Jerome Powell's speech Friday to the Jackson Hole symposium of central bankers and economists, which will be closely followed for any indication about its policy plans in light of rising inflation and the economic rebound.
The bank is widely expected to begin easing back on its vast bond-buying programme by the end of the year, though the spread of the Delta variant and its impact on growth has some observers and even hawkish Fed members rethinking the wisdom of doing so.
Analysts said the speed and timing of a pullback could be crucial.
"When the Fed actually announces the taper, it will likely also give some degree of information on what pace it will take and how flexible or inflexible they want to be with the process," Guneet Dhingra, at Morgan Stanley, said.
"That could provide a key signal for the rate-hike cycle -- particularly with regard to the pace of the hikes."
However, some warn that starting to taper too late could cause problems.
"It would be dangerous for the Fed to do this because it needs to be in a position -- from the middle of next year -- to start putting out the rhetoric that they may be raising rates," said Steven Barrow, of Standard Bank Group.
"And we know it's not out of the realm of possibilities that the Fed could lift rates some time around the end of next year. So I'm focused more on the end point for Fed tapering than the starting point."
In early trade, Asian investors took a step back with Hong Kong, Shanghai, Tokyo, Sydney, Singapore, Wellington, Taipei and Jakarta all down.
Seoul was also in the red after South Korea became one of the first major economies to start lifting interest rates since they were cut to record lows last year to battle the coronavirus impact.
The central bank move came as it looks to tackle surging household debt sharp rises in house property prices. The won jumped against the dollar after the announcement.
Traders are also keeping a keen eye on China after it rattled world markets in recent weeks with a wave of regulations aimed at winding in private firms -- particularly in the tech sector -- it considered to have become too powerful and posed security risks.
While there has been little noise out of Beijing lately, the state-backed People's Daily reported that Xi Jinping had said China should try to achieve key economic and social development objectives this year.
While it did not set out specifics, the president has embarked on a mission to rein in the country's tycoons and powerful organisations, instead focusing on "common prosperity".
Key figures around 0230 GMT
Tokyo - Nikkei 225: DOWN 0.1 percent at 27,693.42 (break)
Hong Kong - Hang Seng Index: DOWN 0.9 percent at 25,463.04
Shanghai - Composite: DOWN 0.7 percent at 3,514.49
Dollar/yen: DOWN at 109.07 yen from 110.00 yen at 2030 GMT
Euro/dollar: DOWN at $1.1763 from $1.1772
Euro/pound: DOWN at 85.52 pence from 85.54 pence
West Texas Intermediate: DOWN 0.8 percent at $67.82 per barrel
Brent North Sea crude: DOWN 0.6 percent at $71.80 per barrel
New York - Dow: UP 0.1 percent at 35,405.50 (close)
London - FTSE 100: UP 0.3 percent at 7,150.12 (close)
-- Bloomberg News contributed to this story --