Asian stock markets were becalmed on Wednesday as a surge in oil and Chinese factory prices added to worries that a hot US inflation reading could cause policymakers to lift interest rates.
US crude futures rose 1 percent to a two-week high of US $84.97 a barrel in early trade and Brent futures made a one-week top of $85.35.
Data showed factory gate prices in China have soared 13.5 percent year-on-year since October, beating forecasts and warnings of pressure on supply chains to global consumers.
The Nasdaq logged its first fall in a dozen sessions after the broadest index of Asia-Pacific shares outside Japan and Japan's Nikkei dropped 0.2 percent in and Overnight on Wall Street.
Consumer prices will go up by 5.8 percent year-on- year and even more dovish Federal ReserveFederal Reserve officials Neel Kashkari and Mary Daly have conceded that it is running hotter for longer than expected, according to US data due at 1330 GMT.
In a note, NatWest Markets strategists said, "I would imagine that now there is not officially a doubt left within the Fed that risks around inflation are much more elevated than previously assumed.
Longer-dated bonds had rallied on Tuesday, flattening the Treasury yield curve, as investors seem to be betting on hikes in the next year or so to reduce growth and inflation in the years to come.
A firm CPI reading can add a bit more fuel to the flattening, according to NatWest analysts. But I would argue that a weak CPI number wouldn't be enough to ease markets into thinking that the Fed will hold back. After touching a six-week low on 1.4150 percent overnight, the benchmark 10 year yield dropped a bit in Asia hours, lifting the benchmark 10 year yield by about 2 basis points to 1.4626 percent.
The yen was lifted to a one-month high on Tuesday, despite traders favoring safe havens.
The Japanese currency held there on Wednesday at 112.84 per dollar and risk-sensitive currencies, such as the Australian dollar, under pressure, with the Aussie testing support at its 50 day moving average of $0.7374.
Chris Weston, head of research at broker Pepperstone in Melbourne said the dollar will be sensitive to moves in the 2 -- 5 year part of the US Treasury curve.
He said that it's important to see a monthly US CPI print of 0.8 percent to see the dollar index break out of the top of the range of 94.50. The index was last at 93.997.
The economic slowdown in China is nagging on investors' minds, especially as a credit crunch seems to be spreading quickly through the giant property industry.
Bonds in the sector had suffered a new pounding on Tuesday, with the sell-off dragging in even investment-grade debts.
The market is driven by fear rather than rationale, according to analysts at J.P. Morgan. Valuations have factored in the worst case scenario. A survey in Japan shows that the manufacturers' business confidence has fallen to a new seven-month low and Tesla stock is a bit of a gauge of retail investor sentiment, turning wobbly.
The carmaker suffered its sharpest share price fall in 14 months on Tuesday as traders brace for a possible sale from Elon Musk, the poster-stock of the thumping rally from pandemic lows.
Gold andBitcoin are the main beneficiaries of the market turbulence, with gold up 3.5 percent in a week to $1,829 an ounce, and bitcoins are hovering at $67,267 after hitting a record peak of $68,564 a day ago.