San Francisco Frontiers - Asian markets mixed as traders await key inflation report

While a healthy jobs report on Friday soothed worries about a possible recession, it also reinforced expectations the central bank will press ahead with monetary tightening as it tries to cool the economy and bring inflation down.

The discussion comes as fears about the financial sector -- following turmoil last month that saw two US lenders go under -- have been tempered in recent weeks.

On Tuesday, Neel Kashkari at the Minneapolis Fed said: "I'm not ready to declare all clear, but there are hopeful signs that these risks are now better understood and calm is being restored."

Analysts said the next few days could play a key role in market sentiment as Wednesday's consumer prices report will be followed by data on wholesale prices Thursday, then the start of the corporate reporting season on Friday.

There appears to be a split within the Fed over the best way forward for its rate hike drive.

Chicago Fed boss Austan Goolsbee urged "prudence and patience", saying officials should weigh the effects on the economy of a year-long campaign of tightening as well as the banking upheaval.

"Given how uncertainty abounds about where these financial headwinds are going, I think we need to be cautious," he said in prepared remarks at an event hosted by the Economic Club of Chicago.

"We should gather further data and be careful about raising rates too aggressively until we see how much work the headwinds are doing for us in getting down inflation."

However, his New York counterpart John Williams said another increase before pausing was a "reasonable starting place", adding that incoming data should be noted in the decision-making.

There is also a growing hope among traders that the Fed will stop lifting rates soon and could even begin cutting before the end of the year.

"With the Fed about to hit the peak of its cycle, markets will naturally anticipate the next move to be lower in rates," said Stephen Innes of SPI Asset Management.

"Note the modern-day history book of Fed cuts is very bullish for stocks. And keep in mind if the Fed decides to cut later in 2023, they typically slice and dice twice as fast as the distance travelled on their hiking cycle."

After a mixed performance on Wall Street, Asia followed suit Wednesday.

Tokyo, Shanghai, Sydney and Wellington rose but Hong Kong, Singapore, Taipei, Manila and Jakarta fell while Seoul was flat.

- Key figures around 0230 GMT -

Tokyo - Nikkei 225: UP 0.6 percent at 28,096.74 (break)

Hong Kong - Hang Seng Index: DOWN 0.8 percent at 20,329.53

Shanghai - Composite: UP 0.4 percent at 3,325.68

Euro/dollar: UP at $1.0924 from $1.0918 on Tuesday

Pound/dollar: UP at $1.2436 from $1.2428

Euro/pound: UP at 87.85 pence at 87.83 pence

Dollar/yen: UP at 133.70 yen from 133.69 yen

West Texas Intermediate: UP 0.1 percent at $81.58 per barrel

Brent North Sea crude: UP 0.1 percent at $85.68 per barrel

New York - Dow: UP 0.3 percent at 33,684.79 (close)

London - FTSE 100: UP 0.6 percent at 7,785.72 (close)

J.Scott--SFF