Asian markets saw fresh volatility Wednesday, with Shanghai experiencing sharp swings, as weak manufacturing data highlighted weakness in the global economy but raised hopes central banks would stick to a loose monetary policy.
The dollar recovered from a sell-off against the euro in New York prompted by surprisingly positive eurozone data, which briefly raised the prospect the European Central Bank (ECB) would delay an expected stimulus boost.
Official figures showing that a gauge of Chinese manufacturing activity hit a three-year low in November were followed later in the day by news that US activity contracted at the fastest pace since June 2009.
While the US economy, the world's biggest, has shown strong signs of recovery, traders remain nervous about the future. Commodity prices are at multi-year lows and the dollar has soared this year, 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 increase in interest rates -- expected to be announced by the Federal Reserve this month -- would be slow and gradual.
Asian stock markets shifted in and out of positive territory. Shanghai ended 2.3 percent higher after tumbling more than two percent at one point.
The benchmark index has moved higher this week after plunging 5.5 percent Friday on news that several top brokerages were being investigated as part of a crackdown linked to 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.
- Eurozone boost -
Hong Kong ended 0.4 percent higher but Tokyo, Sydney and Seoul all closed lower.
On currency markets talk of a slow rise in US rates weighed on the dollar in New York, where it fell to 122.86 yen while the euro climbed to $1.0634.
However, the greenback bounced back in Asia ahead of Fed chair Janet Yellen's testimony to Congress on the US economy.
The euro was also supported by data showing manufacturing growth in the eurozone picked up the pace last month while unemployment tumbled, fuelling hopes the bloc is slowly recovering.
The Eurostat agency said unemployment in the 19-country region fell to 10.7 percent in October, the best reading since January 2012. In Germany the rate sank to its lowest level since reunification in 1990.
But the euro dipped in afternoon Tokyo trading Wednesday. Analysts said the data were likely not enough to change policymakers' minds as persistent economic weakness in the bloc keeps alive hopes for more ECB intervention.
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.
European stock markets rose in opening deals, with London up 0.3 percent at 6,415.64, Frankfurt 0.4 percent higher and Paris climbing 0.2 percent.
- Key figures around 0820 GMT -
Tokyo - Nikkei 225: DOWN 0.4 percent at 19,938.13 (close)
Shanghai - composite: UP 2.3 percent at 3,536.91 (close)
Hong Kong - Hang Seng: UP 0.4 percent at 22479.69 (close)
London - FTSE 100: UP 0.3 percent at 6,415.64
Euro/dollar: DOWN to $1.0627 from $1.0634 late Tuesday
Dollar/yen: UP to 123.03 yen from 122.86 yen
New York - Dow: UP 1.0 percent at 17,888.35 (close)