SYDNEY, Sept 13 — Asian shares fell after Wall Street wobbled overnight with markets bracing for key US inflation data today, while an oil price spike stoked anxiety about persistent price pressures, complicating the interest rate outlook.

The euro was supported by a hawkish shift in expectations for the European Central Bank tomorrow, with bets now favouring a hike, after a Reuters report that the ECB expects inflation will stay above 3 per cent next year in its updated forecasts.

Europe is set to open lower, with EUROSTOXX 50 futures falling 0.5 per cent. Both S&P 500 futures and Nasdaq futures were mostly unchanged.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.3 per cent while Tokyo’s Nikkei eased 0.1 per cent.

Chinese blue-chips dropped 0.7 per cent on still-fragile sentiment about the outlook for the world’s second largest economy. Hong Kong’s Hang Seng index reversed earlier gains to be mostly flat.

At the forefront of markets’ minds is the crucial US Consumer Price Index (CPI) report expected today, which should shed further light on the inflation outlook and provide some clarity about whether the Federal Reserve is done tightening.

While core CPI is seen cooling to 4.3 per cent year-on-year in August from 4.7 per cent, rising energy costs are forecast to keep headline inflation elevated at 3.6 per cent. And the latest spike in oil prices to ten-month highs is unlikely to escape the Fed’s attention.

"What’s happening with oil and headline inflation is still too soon for the Fed to be signalling the all clear as far as the risks of some incremental tightening before they’re done,” said Ray Attrill, a currency strategist at National Australia Bank.

"When you have those sort of volatility in the food and energy components, the worry is that if it’s persistent then it does tend to bleed into core inflation measures over time.”

Oil prices extended gains today. Brent crude futures settled 0.3 higher at US$92.31 (RM432.29) per barrel, nearing a ten-month peak that it hit a session ago, while US West Texas Intermediate crude futures were up 0.3 per cent at US$89.13.

On Wall Street, the S&P 500 fell 0.6 per cent overnight, the Nasdaq declined 1 per cent while Dow Jones was mostly flat.

Apple dropped 1.8 per cent after unveiling new iPhones while not increasing prices as it faces a global smartphone glut, and Oracle shares tumbled more than 13 per cent after the cloud-services provider forecast current-quarter revenue below targets.

The euro was supported at US$1.0753, nearing one-week highs on the Reuters story, while markets moved to favour a rate hike from the ECB tomorrow with a 75 per cent probability, compared with a split chance previously.

"The leak raises the possibility of a hawkish hike which would be much more supportive for the EUR,” said Steve Englander, global head of G10 FX research at Standard Chartered, referring to the Reuters report.

"Our baseline view is that the ECB will signal a hawkish hold and be deterred by soft growth from further hikes... We think it is a close call.”

The US dollar recovered some of its recent losses against the yen, up 0.2 per cent to ¥147.35 after comments from Japan’s top central banker on a possible early exit from its negative interest rate policy sent the Japanese currency soaring.

Treasury yields climbed today, with the two-year note touching 5.0263 per cent, compared with a US close of 5.005 per cent. Ten-year yields held at 4.2842 per cent, up from the close of 4.264 per cent.

Gold price XAU= was flat at US$1,911.29 per ounce. — Reuters