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Asian shares drifted off on Wednesday as anxious investors awaited more earnings reports from corporate America, while the dollar held firm in the wake of robust US retail data and a Brexit-driven dive in the pound.
Oil prices also nursed losses on hints US tensions with Iran could be easing and as data showed stockpiles fell by less than expected last week.
Not helping the mood was Tuesday's threat from US President Donald Trump to put tariffs on another $325 billion of Chinese goods, amid market nervousness over when face-to-face talks will resume.
The fallout of the year-long trade dispute was apparent in data from Singapore, where exports sank by the most in six years in June led by a steep drop in electronics.
In the stock markets, trade was generally muted with MSCI's broadest index of Asia-Pacific shares outside Japan off 0.25 per cent.
Japan's Nikkei eased 0.3 per cent and South Korea 1 per cent, while Chinese blue chips edged up 0.3 per cent. E-Mini futures for the S&P 500 were a fraction firmer but EUROSTOXX 50 futures dipped 0.2 per cent.
A surprisingly strong reading on US retail sales released overnight had outweighed weakness in industrial production for the June quarter and boosted the dollar.
Yet, it barely budged market wagers on a Federal Reserve rate cut this month, with Chicago Fed President Charles Evans touting a 50 basis points of easing.
Futures are 100 per cent priced for a cut of 25 basis points, and imply a 25 per cent chance of 50 basis points.
“We do not expect these solid (retail) results to impact the Fed's decision to cut rates at the end of the month,” said Michelle Girard, chief US economist at NatWest Markets.
“The Fed knows the US consumer is strong; policymakers are worried about the downside risks associated with global growth and weak manufacturing/business investment, which is why they believe a rate cut is appropriate.”
Analysts at Barclays were even more dovish, arguing persistent uncertainty and soft inflation warranted quarter-point cuts in July, September, and December.
STERLING STRICKEN
Expectations of policy stimulus, and the resulting drop in bond yields, helped counter concerns about corporate profits.
JP Morgan Chase & Co and Wells Fargo & Co beat quarterly profit estimates, but reported weaker net interest income. Bank of America and Netflix report on Wednesday.
The Dow eased 0.09 per cent on Tuesday, while the S&P 500 lost 0.34 per cent and the Nasdaq 0.43 per cent.
In currency markets, sterling was the star for all the wrong reasons. It slid 0.9 per cent overnight to 27-month lows amid fears the UK could tumble out of the European Union with no trade deal to soften the blow.
The pound was last at $1.2414, a big come-down from its March peaks of $1.3383. The dollar was a major beneficiary at 97.323 on a basket of currencies, having risen 0.5 per cent overnight. The euro settled at $1.1214, after a loss of 0.4 per cent on Tuesday, while the dollar held at 108.20 yen.
The dollar's gains tarnished gold a little, with the precious metal easing to $1,404.40 per ounce from a high above $1,418 on Tuesday.
Oil prices were trying to stabilise after falling more than 3 per cent overnight. Brent crude futures edged up 18 cents to $64.49, while US crude rose 2 cents to $57.64 a barrel.
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