Sydney - Asian stocks squeezed higher on Friday but gains were tentative ahead of US jobs data that will be closely watched for signals on whether the world's biggest economy is headed for a second recession.
There was no missing the sombre mood ahead of the employment report. Surprisingly strong US manufacturing data earlier this week had dispelled some gloom about faltering growth, but investors were far from convinced all was well.
The cautious tone spill over into Europe, where the FTSEurofirst 300 index of top shares, Britain's FTSE 100, Germany's Dax and France's CAC 40 all edged up 0.2% - 0.3%. US S&P 500 futures weakened a fraction.
Yet, some warned the gloom may be overdone.
"Market players have been building up positions for some time to brace for a weak US recovery. Any upside surprise in the payrolls data could move the market," said Daisuke Karakama, market economist at Mizuho Corporate Bank.
The MSCI Asian stock index outside Japan edged up just 0.3%. Japan's Nikkei rose 0.6%, but was still down more than 13% for the year.
Sony managed to shrug off economic woes by adding 2.4% after it said it was expanding a video-on-demand service in Europe.
The US labour market is forecast to have shed 100 000 jobs in August as the jobless rate crept higher to 9.6%.
As always, a bad outcome would likely hammer assets deemed dependent on strong economic growth, such as stocks and commodities, whilst boosting government bonds.
Underscoring angst about US growth, traditional safe-haven currencies clung to recent peaks, while US Treasury yields edged lower.
The yen was locked near a 15-year high against the dollar, while the Swiss franc flew near a record against the euro.
Commodity prices barely budged. Gold was little changed at $1 251.25 an ounce and oil was down 0.4% at 74.70 a barrel.
Can Asian markets hold up?Many believe Asian economies can charge ahead even with tepid US growth, owing to sturdy demand from emerging market giants China and India.
Yet, it is less clear Asian stocks can weather a US slowdown.
Some argue that despite Asia's stellar growth profile, its equity markets are still inextricably linked to developed markets - institutional investors in the west are still among the biggest buyers of Asian stocks.
Mark Matthews from Macquarie in Hong Kong, for instance, said the correlation between the MSCI Asia ex-Japan stock index and the MSCI World Index has risen to 0.8 between 2005 and 2010, from 0.63 in the five years up to 2005.
Price action so far seemed to suggest that holds some truth. The MSCI Asia ex-Japan index has defied the region's impressive growth and is down 0.7% this year. The MSCI World index is also down, but by a bigger margin at 3.5%.
But other argued that over the longer term, Asia's solid growth and healthy public finance would increasingly help it to survive thriftier US and European consumers.
"In the short term, I don't think any market is immune to news flow, not least from the US and its payrolls," said Alex Boggis, a fund manager at Aberdeen, which manages more than $246bn in assets.
"But longer term, it would do better, and in the medium term, it would do better."