Volkswacht Bodensee - Asian markets struggle as focus turns to US inflation

The tepid performance came after a hot couple of weeks on trading floors fuelled by optimism over an easing of US monetary policy.

Last week's interest rate cut came with Fed forecasts for two more before the end of the year as officials aim to shore up the stuttering labour market despite elevated inflation.

That puts in focus Friday's report on personal consumption expenditures, the Fed's preferred measure of inflation.

With trade subdued by a holiday in Japan and an approaching storm in Hong Kong, Asian markets drifted.

Hong Kong and Shanghai slipped with Manila and Wellington, while Sydney, Seoul, Singapore and Jakarta rose.

Taipei jumped more than one percent with chip titan TSMC soaring nearly three percent as it tracked US counterpart Nvidia, which announced a $100 billion investment in OpenAI for next-generation artificial intelligence.

However, there are growing worries that the surge may have gone too far and markets are due a pull-back with eyes on a possible government shutdown in Washington.

Senators failed to pass a stopgap funding bill Friday after the Republican-controlled House of Representatives narrowly passed it.

The bill was shot down by Democrats and with both chambers scheduled to be in recess next week, time is running out to keep the government running after the end of the fiscal year September 30.

A shutdown would see non-essential operations start to grind to a halt and hundreds of thousands of civil servants temporarily left without pay.

"There are rickety bridges ahead. The US government shutdown drama remains unresolved—another potential rockslide on the tracks," said SPI Asset Management's Stephen Innes.

"The Senate’s failure to bridge the gap between competing proposals leaves traders watching the Sept. 30 deadline with one eye, even as the other scans record-high tickers.

"Markets rarely derail on the first warning, but complacency can turn into chaos when the train rounds a blind corner."

- Key figures at around 0230 GMT -

Hong Kong - Hang Seng Index: DOWN 0.7 percent at 26,155.08

Shanghai - Composite: DOWN 0.8 percent at 3797.10

Tokyo - Nikkei 225: Closed for a holiday

Euro/dollar: UP at $1.1805 from $1.1799 on Monday

Pound/dollar: DOWN at $1.3510 from $1.3515

Dollar/yen: DOWN at 147.79 yen from 147.87 yen

Euro/pound: UP at 87.36 pence from 87.30 pence

West Texas Intermediate: DOWN 0.4 percent at $62.03 per barrel

Brent North Sea Crude: DOWN 0.4 percent at $66.28 per barrel

New York - Dow: UP 0.1 percent at 46,381.54 (close)

London - FTSE 100: UP 0.1 percent at 9,226.68 (close)

U.Maertens--VB