Asian markets turned lower on Wednesday as a recent rally ran out of steam and investors struggled to match a strong lead from Wall Street.

New York’s three main indexes rose again after data showed a forecast-busting rise in retail sales as well as solid earnings from shopping giants Walmart and Home Depot. The news reinforced optimism about the recovery in the world’s top economy and showed consumers were brushing off the effects of surging inflation, for now.

However, they also provided more support to calls for the Federal Reserve to act sooner to prevent overheating and make sure prices do not run out of control. Top Fed official James Bullard said the bank should take a “more hawkish” shift and that the tapering of its vast bond-buying programme – which has helped support an extended global equity rally – “could move faster”. But San Francisco Fed chief Mary Daly remained on the more doveish side, believing – like Fed boss Jerome Powell – that price pressures were temporary and suggesting acting too soon could hurt the economic rebound. 

In early trade, Hong Kong retreated for the first time after a six-day run-up, while Tokyo, Shanghai, Taipei, Seoul, Singapore, Sydney and Wellington were also in negative territory. 

Still, analysts remain guardedly upbeat about the outlook for equities. “All signs are pointing to a very strong holiday season for retailers and that should help keep sending stocks higher,” said OANDA’s Edward Moya. He added that markets were “fixated on inflation”, with an expectation that things can get “a little uglier over the next couple of months, before traders get unnerved”.

And Xi Qiao, of UBS Global Wealth Management, added: “Going into the finishing of this year, we feel like the equity markets should remain strong.” She added that “we expect more volatility ahead with rising rates”, with inflation and COVID expected to continue causing concern.

Oil prices extended losses as investors wait to see if Joe Biden heeds calls to tap the United States’ giant reserves to meet surging demand.

And a report in Hong Kong’s South China Morning Post said the US president had asked Chinese counterpart Xi Jinping in their virtual summit to join him in releasing extra crude into the market. However, OANDA’s Moya said the market, which has been boosted by the global reopening, would likely remain elevated for some time. “The oil market deficit seems likely to last a while longer as the Biden administration seems unwilling to ask US shale to increase production,” he said in a note. OPEC, along with other major producers, “has the oil market right where it wants it and... will now likely benefit with $80 oil at the minimum over the next couple of years”.