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Asian markets mostly fell Thursday after Chinese authorities unveiled plans to tighten regulation across multiple sectors over the coming years, weeks after it hit stocks by cracking down on a range of industries including tech firms.
The weak showing came despite a record lead from Wall Street, as traders assessed US figures showing a drop in inflation that eased some pressure on the Federal Reserve to start winding down its ultra-loose monetary policy soon.
Stocks had a largely positive start to the week after a recent run of pressure caused by concerns about the fast-spreading Delta variant as well as traders taking a breather after a long-running rally.
China's crackdowns have also had a detrimental impact, and investors continue to keep an eye on Beijing for any new developments.
On Wednesday the country's State Council signalled the government's push to regulate sweeping parts of the economy would continue over the next five years.
A statement released jointly by the council and the Communist Party's Central Committee said sectors including private tutoring, and food and drugs would see tougher legal enforcement, fuelling concerns officials were not finished with moves to tighten their grip on the economy.
Ken Cheung Kin Tai, an analyst at Japan's Mizuho Bank, said in a research note that "foreign investors will continue to reassess the outlook for Chinese investments under tighter regulations".
And Graham Webster, who leads the DigiChina project at the Stanford University Cyber Policy Center, added: "We can't draw too much insight about enforcement and the potential shape of crackdowns from one document or another.
"Much depends on what bureaucrats and their higher-ups land on in terms of priorities month after month."
Hong Kong and Shanghai fell, though OANDA's Jeffrey Halley said the reason the losses were not so steep even after the latest news from China may be because "investors are being more accepting of the 'new normal'".
Tokyo, Seoul, Wellington, Taipei and Manila also fell though there were gains in Sydney, Singapore, Mumbai and Jakarta.
London dipped despite data showing the UK economy rebounded 4.8 percent in the second quarter as the relaxing of lockdowns boosted consumer spending.
Paris and Frankfurt edged up.
The Dow and S&P 500 finished at all-time highs on Wednesday, buoyed by data showing that while consumer prices rose significantly for energy and food in July, core inflation -- which strips out energy and food costs -- came in at 0.3 percent, just a third of the rate in June.
The news soothed lingering concerns of accelerating inflation, which could pressure the Fed to hasten its plan to tighten the accommodative monetary policies that have been key to driving a rally across world markets for more than a year.
But there was some caution on the significance of the monthly figures for the long-term outlook.
"There is a lot being read into the month over month numbers, but one month does not make a trend," Jeanette Garretty, chief economist at Robertson Stephens Wealth Management, told Bloomberg Television.
"It is a little too early to say that this is conclusive evidence that we can see some of the heat on prices coming off."
San Francisco Fed chief Mary Daly lifted expectations for a move before 2022, telling the Financial Times she was "very optimistic and positive" about improvements in key areas.
"That for me means it's appropriate to start discussing dialling back the level of accommodation that we're giving the economy on a regular basis", she said, adding: "Talking about potentially tapering those later this year or early next year is where I'm at."
Investors are also awaiting a meeting of world central bankers and financial leaders later this month in Jackson Hole, Wyoming, where Fed boss Jerome Powell's speech is likely to be the key focus in hopes he will provide fresh clues on policy.
- Key figures around 0720 GMT -
Tokyo - Nikkei 225: DOWN 0.2 percent at 28,015.02 (close)
Hong Kong - Hang Seng Index: DOWN 0.5 percent at 26,517.82 (close)
Shanghai - Composite: DOWN 0.2 percent at 3,524.74 (close)
London - FTSE 100: DOWN 0.2 percent at 7,204.92 (close)
Euro/dollar: DOWN at $1.1740 from $1.1743
Pound/dollar: UP at $1.3876 from $1.3866
Euro/pound: DOWN at 84.62 pence from 84.67 pence
Dollar/yen: DOWN at 110.35 yen from 110.43 yen
Brent North Sea crude: UP 0.3 percent at $71.65 per barrel
West Texas Intermediate: UP 0.2 percent at $69.40 per barrel
New York - Dow: UP 0.6 percent at 35,484.97 (close)
-- Bloomberg News contributed to this story --
leg-dan/rbu
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