Asian markets mostly fell Wednesday as a tepid lead from Wall Street and worries about the impact of the Delta variant on the global recovery tempered investor appetite, though hopes for more stimulus helped Tokyo extend its recent rally.
Profit-taking added to the caution with some of the wind appearing to have come out of buyers' sails, having pushed valuations up for more than a week.
While the Nasdaq clocked up yet another record with a small gain, the S&P 500 and Dow ended with a whimper as they reopened after a long weekend, with analysts suggesting concerns about Covid and the end of government handouts were key reasons.
Traders are keeping a close eye on the fast-spreading Delta strain, which is sending infection rates spiking around the world and forcing some governments to reimpose containment measures or lockdowns, raising concerns about the economic recovery.
Still, observers say the general mood is positive for the future, with hopes that the Federal Reserve will delay tapering its monetary policy until the end of the year lending support.
"Localised setbacks in combating the virus have the potential to contribute to market volatility and slow the economic rebound in selected countries," Mark Haefele, at UBS Group AG, wrote in a note.
"But we continue to see broad progress in curbing the pandemic and returning to economic normality."
Tokyo's Nikkei 225 ended above 30,000 for the first time since April as it continued a rally enjoyed since Japan's Prime Minister Yoshihide Suga said Friday he will stand down, which raised hopes his successor will introduce fresh economic stimulus.
On Wednesday, one of the front-runners, Fumio Kishida, pledged to push for trillions of yen in investment if he takes the post.
Data showing growth in the second quarter was better than first thought added to the positive vibes. The index has risen around five percent since the news broke, putting it on course for a three-decade high.
Hong Kong reversed early gains, while there were also losses in Sydney, Seoul, Singapore, Taipei, Wellington, Mumbai, Bangkok and Jakarta. Shanghai ended marginally down.
Bitcoin continued to struggle, sitting at around $45,000, after seeing wild fluctuations on Tuesday as El Salvador became the first country to use it as legal tender.
The unit plunged by almost a fifth to as low as $43,000 after a technical issue hit the official digital wallet on vast consumer demand, though that was later resolved, while analysts said it was also hit by profit-taking.
"Social media platforms were very cautious over the weekend that a plunge could occur following El Salvador's big day," said OANDA's Edward Moya, adding that some traders likely bought into the currency ahead of the big day before deciding to "sell the fact".
London, Paris and Frankfurt stocks opened lower.