Asian stock markets were treading water on Wednesday after upbeat U.S. data fanned speculation the Federal Reserve could start slowing its asset buying as early as next month -- depressing bond prices and lifting the dollar.
The air of caution was clear in MSCI's broadest index of Asia-Pacific shares outside Japan which ticked down 0.2 per cent. Australia's main index dipped 0.3 per cent while the Nikkei eased 0.2 per cent.
Mirroring the modest moves across the region, shares in Shanghai lost 0.2 per cent.
Wall Street had turned lower on Tuesday after the Institute for Supply Management's October read on the U.S. services sector came in at a surprisingly strong 55.4. It also included a notable jump in the employment outlook which could lessen the chance of a very weak payrolls number on Friday.
While evidence of economic resilience should be welcome, it also adds to the case for the Fed to wind back its bond buying programme relatively soon. Most analysts still favour March as the window for a move, but a shift in December is a growing risk.
That pressured Treasury prices and lifted yields on 10-year notes 5 basis points to 2.66 per cent, while markedly widening the gap between long and short-term rates.
Equity investors reacted with caution, leaving the Dow Jones industrial average down 0.13 per cent on Tuesday, while the S&P 500 Index eased 0.28 per cent.
The contrast with the euro zone was stark as a string of disappointing economic numbers piled pressure on the European Central Bank (ECB) to take action, if not at its policy meeting on Thursday, then certainly by December.
"We expect the ECB to soon make clear its intentions regarding arresting deflation concerns," analysts at Barclays Capital wrote in a note to clients.
"We anticipate a looser monetary stance to be adopted at the December meeting, but the ECB's intentions to be aired ahead of it."