Even a strong performance on Wall Street was not enough to lift sentiment across the region, after data showed the Federal Reserve's preferred gauge of inflation rose in December at its slowest pace in more than a year.
The reading saw dealers ramp up bets on the central bank lifting interest rates this week by just 25 basis points, down from the half-point hike last month, which followed four straight 75-point increases.
The European Central Bank and Bank of England are also due to announce decisions this week.
The meetings come as a string of recent data suggests that last year's monetary tightening campaign by policymakers was beginning to kick in, as price rises begin to slow from their multi-decade highs.
There remains trepidation on trading floors that economies could still slip into recession, while a mixed earnings season so far has also caused concern about company profits.
US Treasury Secretary Janet Yellen said that while she was pleased to see inflation coming down, she remained wary about the economic outlook.
"I'm reasonably satisfied by the data that I've seen so far, but I don't want to minimise the risk of recession" owing to the Fed's rate hikes "slowing down the economy", she told Bloomberg News.
That worry was offsetting optimism in Asia about a strong recovery in China this year, as it emerges after the lifting of painful zero-Covid policies.
Signs of strong travel and spending over last week's break added to the upbeat mood, coupled with data showing there was no explosion in Covid cases over that time, suggesting the disease could be under control now.
Shanghai rose as it resumed trading, though it pared big morning gains, while Tokyo was also up and Taipei piled on more than three percent thanks to a surge in chipmakers.
Chinese markets are "catching up with the performance of Hong Kong and US markets during the Chinese New Year", said Willer Chen, at Forsyth Barr Asia.
"The market is very excited about the holiday data."
- 'Home truths' -
However, Hong Kong sank after enjoying a healthy rally through most of January, while Sydney, Seoul, Singapore, Jakarta, and Manila also slipped. Bangkok and Wellington were barely moved.
"For now stock markets look strong," said Michael Hewson at CMC Markets. "However this week could well be the pin that pops this month's rally and injects a dose of realism into market expectations.
"Whether it's the Federal Reserve, or the European Central Bank, the market could well get delivered a few home truths by central bankers later this week."
Mumbai was in the red as firms linked to tycoon Gautam Adani's business empire failed to hold big early rebounds from last week's massive losses, which wiped out almost $45 billion from their valuations.
Adani's firms have suffered hefty selling after US investment group Hindenburg Research alleged "brazen stock manipulation and (an) accounting fraud scheme over the course of decades".
The conglomerate hit back saying it was the victim of a "maliciously mischievous" reputational attack and late Sunday issued a 413-page statement that it said rebutted the claims.
Flagship Adani Enterprises was up just 1.5 percent in Mumbai but Adani Total Gas, Adani Transmission and Adani Green Energy saw trading halted again after a 20-percent plunge each. Adani Power and Adani Wilmar also hit their circuit breakers after falling five percent each.
Oil prices dipped even with demand expectations rising as China emerges from years of strict Covid controls, while traders brushed off news of a drone strike on an Iranian defence ministry site.
"While oil prices opened higher on the headlines, the risk to global supply seems relatively limited at present," said SPI Asset Management's Stephen Innes.
"Iran's oil production facilities are located primarily in the southwest of the country and were not targeted in the current strikes.
"Iran is a marginal global crude exporter, and any significant disruption could be offset by newly-created OPEC spare capacity."
London, Paris and Frankfurt all fell at the open.
Hong Kong's sovereign wealth fund suffers record loss
Hong Kong (AFP) Jan 30, 2023 -
Hong Kong's half-trillion-dollar investment fund set up to defend the financial hub's currency has suffered its largest loss on record of more than HK$200 billion ($25 billion), authorities said Monday.
The Exchange Fund, the semi-autonomous Chinese city's de facto sovereign wealth fund, is one of the largest public investment vehicles in the world.
Its slump last year was only the third loss since Hong Kong's Monetary Authority (HKMA) began disclosing the fund's annual performance in 2000.
The de facto central bank attributed the unprecedented deficit, the first since 2015, to "an exceptionally volatile year" in global financial markets.
"This investment environment... has also marked 2022 as the only year in almost half a century during which returns from equities, bonds and major currencies against the US dollar all recorded negative returns simultaneously," HKMA Chief Executive Eddie Yue told reporters on Monday.
Yue said he expected the fund to continue facing significant uncertainty in 2023 amid continued tightening of monetary policy, lowered economic growth and geopolitical tensions.
"On a more positive note... the mainland (Chinese) economy may rebound strongly this year," he added, boosting the appeal of bond investments.
Founded in 1935, the Exchange Fund has been the city's war chest to defend the Hong Kong dollar against short-sellers and maintain its peg to the greenback.
Last year, under short selling encouraged by hikes in US interest rates, the HKMA spent more than HK$220 billion over six months to support the local currency.
At the end of last year, the fund held more than HK$4 trillion ($500 billion) in assets.
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