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Hong Kong -Asian markets saw fresh volatility on Wednesday, with Shanghai seeing sharp swings, as weak factory activity data highlighted weakness in the global economy but fuelled hopes central banks will stick to a loose monetary policy.
The euro also held its own after rallying in New York as a surprisingly positive set of eurozone figures raised the possibility the European Central Bank will delay an expected stimulus boost.
Official figures showing a gauge of Chinese manufacturing activity hit a three-year low in November was followed later in the day by news that US factory work contracted at the fastest pace since June 2009.
While the US economy, the world's biggest, has shown strong signs it is well on track to recovery, traders remain nervous about the future, with commodity prices at multi-year lows and the dollar soaring, hitting exports.
"Traditionally, the manufacturing sector has been the canary in the coal mine when it comes to slowing growth. To what extent does this bleed over into other sectors of the economy - that's yet to be seen," Brett Ryan, a US economist at Deutsche Bank Securities in New York, told Bloomberg News.
All three main indexes on Wall Street ended higher as investors bet that an expected increase in interest rates will be slow and gradual.
In Asia, markets shifted in and out of positive territory. Shanghai was 0.1% lower after surging more than 1% at one point.
The benchmark index rose on Monday and Tuesday, having plunged 5.5% at the end of last week on news that several top brokerages were being investigated as part of a crackdown after the summer's market rout.
However, the International Monetary Fund's decision to include the yuan in its special drawing rights basket of elite currencies has provided some buying support.
On currency markets talk of a slow rise in US rates weighed on the dollar, which retreated in New York to $1.0634 from $1.0566 and to ¥122.86 from ¥123.09.
The euro was also given support by data showing factory growth in the eurozone picked up the pace last month while unemployment tumbled, fuelling hopes the bloc is slowly recovering.
The EU's Eurostat agency said unemployment in the 19-country region fell to 10.7% in October, the best reading since January 2012. In Germany the rate sank to its lowest level since the country's reunification in 1990.
Dealers are awaiting a European Central Bank policy meeting this week to see if it ramps up its stimulus programme or, in light of the latest report, stands pat until the new year.
Sydney stocks slipped despite a slight pick-up in the Australian economy in the July-September quarter, which Treasurer Scott Morrison said showed progress in shifting from a resources-fuelled boom to broader-based growth.
Tokyo - Nikkei 225: Down 0.1% at 20 002.12 points (break)
Shanghai - composite: Down 0.1% at 3 452.12
Hong Kong - Hang Seng: Up 0.2% at 22 427.61
Euro/dollar: Down to $1.0620 from $1.0634 late on Tuesday
Dollar/yen: Up to ¥122.95 from ¥122.86
New York - Dow: Up 1.0% at 17 888.35 (close)
London - FTSE 100: Up 0.6% at 6 395.65 (close)
