Volkswacht Bodensee - Asian markets battle to match Wall Street rally ahead of US inflation

With Friday's non-farm payrolls showing the labour market slowing faster than expected, there is a growing worry that the world's top economy is heading for a recession, which sent stocks tumbling.

While the Federal Reserve is widely seen cutting rates at next week's meeting, debate surrounds whether it will be 25 or 50 basis points, with some arguing that going for the bigger option could suggest decision-makers are worried.

Analyst Stephen Innes said there were numerous factors that could sway nervous investors ahead of the Fed's decision.

Wednesday's consumer price index is the first major release and a big miss to the downside could ramp up bets on a 50-points cut but add to concerns about the economy.

"While the labour market is cooling, it's far from frozen, and second-quarter GDP was revised up to a solid 3.0 percent annualised gain, keeping the soft-landing narrative firmly on the table," he wrote in his Dark Side Of The Boom newsletter.

Still he added: "For now, the Fed likely won’t feel the need to hit the panic button with a jumbo rate cut, but stock traders... haven’t fully grasped the depth of the potential labour market weakness yet.

"That leaves the door open for further, potentially sizeable market corrections. Expect the worry meter to creep higher if the employment picture deteriorates further."

All three main indexes on Wall Street rose more than one percent Monday after Friday's steep, tech-led retreat.

In early trade Tuesday, Hong Kong, Tokyo, Seoul, Sydney, Singapore, Taipei, Wellington, Manila and Jakarta all rose, though Shanghai dipped.

Fresh worries about China's economy are also dampening sentiment, with another below-forecast inflation reading Monday reinforcing the view that moves to boost consumer demand and business activity have not taken hold.

August trade data Tuesday will be eyed for clues, with imports expected to have slowed significantly from July.

The country's leaders are now facing pressure to unveil fresh stimulus for the world's number two economy, though they have shown little desire to embark on the bazooka-like spending seen during the global financial crisis.

On currency markets the dollar strengthened, with the euro weighed by an expected rate cut by the European Central Bank on Thursday as inflation edges lower.

- Key figures around 0230 GMT -

Tokyo - Nikkei 225: UP 0.1 percent at 36,244.22 (break)

Hong Kong - Hang Seng Index: UP 0.2 percent at 17,235.31

Shanghai - Composite: DOWN 0.2 percent at 2,729.95

Euro/dollar: DOWN at $1.1033 from $1.1041 on Monday

Pound/dollar: DOWN at $1.3063 from $1.3075

Dollar/yen: UP at 143.29 yen from 143.11 yen

Euro/pound: UP at 84.47 pence from 84.42 pence

West Texas Intermediate: DOWN 0.1 percent at $68.65 per barrel

Brent North Sea Crude: UP 0.1 percent at $71.88 per barrel

New York - Dow: UP 1.2 percent at 40,829.59 (close)

London - FTSE 100: UP 1.1 percent at 8,270.84 (close)

L.Meier--VB