Global stocks mostly fell Thursday as investors fretted that rising inflation could push central banks around the world to hike interest rates sooner than the markets had been predicting.
The European Central Bank has already joined the People's Bank of China in lifting rates to combat inflation and the fear in the markets is that the U.S. Federal Reserve will end up tightening policy sooner than anticipated.
In that context, investors will be monitoring U.S. producer price data later Thursday and Friday's consumer price inflation figures. On Wednesday, the Fed's latest monthly economic assessment, known as the Beige Book showed that rising commodity costs were ratcheting up price pressures.
Analysts said the U.S. inflation figures will likely show that the impact of higher oil and commodity prices is increasing. That could pave the way for the Fed to consider interest rate increases soon and bring an end to its quantitative easing program _ the current $600 billion monetary injection into financial markets is due to expire in June.
Some of the Fed's rate-setters are sounding a more hawkish tone than Chairman Ben Bernanke and high inflation figures may swell their ranks on the Fed's monetary policy committee.
First up will be the producer price data and the expectation in the markets is that the headline index rose by a monthly 1.1 percent in March, which would be the biggest increase since March 2010.
"The risks appear to be the upside of the headline consensus given Beige Book comments of a quite rapid pass through of rising input costs in the manufacturing sector," said Marc Ostwald, a markets strategist at Monument Securities.
Ahead of the figures, stocks in Europe were down fairly sharply while Wall Street was poised to open lower.
The FTSE 100 index of leading British shares was down 1 percent at 5,951 while Germany's DAX fell 0.8 percent to 7,123. The CAC-40 in France dropped 1.1 percent to 3,960.
Wall Street was also poised for a softer opening, though that will depend on the economic data and corporate newsflow. Dow futures were down 0.4 percent at 12,151 while the broader Standard & Poor's 500 futures fell 0.5 percent to 1,302.
China is also in the spotlight amid concerns that consumer price data to be released on Friday will be higher than anticipated and prompt further policy tightening from the People's Bank. The bank has already raised interest rates four times since last October to keep a lid on price gains.
First quarter Chinese economic growth, also due to be reported Friday, is expected to ease from the previous quarter's 9.8 percent.
China's benchmark Shanghai Composite Index ended 0.3 percent lower at 3,042.64.
Investors will also be keeping a close watch on the latest batch of corporate earnings out of the U.S., including results from Google Inc. So far, results have been mixed, though JPMorgan Chase & Co. encouraged Wednesday with a forecast-busting rise in earnings.
"With JPMorgan reporting a 67 percent quarterly profit increase yesterday, investors will be hoping that Google's numbers can kick-start the rally once more," said Ben Critchley, sales trader at IG Index.
Earlier in Asia, Tokyo's Nikkei 225 was up 0.1 percent to close at 9,653.92, while South Korea's Kospi rose 0.9 percent to 2,141.06. Hong Kong's Hang Seng index was down 0.5 percent to 24,014.
In the currency markets, the euro was trading 0.3 percent lower on the day at $1.44. On Tuesday, Europe's single currency pushed above $1.45 for the first time in 15 months amid expectations the European Central Bank will continue to raise interest rates following last week's quarter point hike to 1.25 percent _ its first in nearly three years.
Meanwhile, the dollar was 0.6 percent lower at 83.26 yen.
In the oil markets, prices were steady following a few days of fairly sizeable moves. Benchmark crude for May delivery was down 48 cents at $106.60 a barrel in electronic trading on the New York Mercantile Exchange.
Alex Kennedy in Singapore contributed to this report.