Asian stock markets were becalmed on Wednesday as surges 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.
Factory gate prices in China have soared 13.5 percent year-on-year, according to data, 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.
The US data due at 1330 GMT is expected to show consumer prices go up 5.8 percent year-on-year and even dovish Federal Reserve officials Neel Kashkari and Mary Daly conceded that it is running hotter for longer than expected.
I would imagine that now there is no doubt that the risks around inflation are much more elevated than previously assumed, according to NatWest Markets strategists.
The Treasury yield curve was flattening on Tuesday, as investors seem to be betting on hikes in the next year or so to squash 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. I would argue that a weak CPI number wouldn't be enough to make markets think that the Fed will hold back. The benchmark 10 year yield rose 2 basis points to 1.4626 percent in Asia hours after it touched a six-week low of 1.4150 percent overnight.
On Tuesday, traders favored safe havens and lifted the yen to a one month high, despite the fact that currency markets have been quiet.
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 that the dollar will be sensitive to moves in the 2 -- 5 year part of the US Treasury curve.
He said that we need 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 because 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. There are other clouds that are brewing, with a survey in Japan showing that manufacturers' business confidence has fallen to a fresh seven-month low and Tesla stock, a bit of a gauge of retail investors' sentiment, turning wobbly.
The carmaker, which has been the poster-stock of the thumping rally from pandemic lows, suffered its sharpest share price fall in 14 months on Tuesday as traders brace for a possible sale from Elon Musk.
Gold andBitcoin are the main beneficiaries of the market turbulence with gold up 3.5 percent to $1,829 an ounce and bitcoins hovering at $67,267 after hitting a record peak of $68,564 a day ago.