Shares have edged down, bond yields have eased and the US dollar has crept up towards recent peaks, with markets in a cautious mood before congressional testimony by Fed chairman Jerome Powell and Treasury Secretary Janet Yellen.
The STOXX index of 600 European shares was down 0.4 per cent on Tuesday morning, while the benchmark 10-year German government bond yield dropped 1.9 basis points to -0.3290 per cent as Monday's plunge in the Turkish lira and lingering concerns over coronavirus infection rates drove investors to safer assets.
The dollar firmed and S&P 500 futures were 0.28 per cent lower, with markets turning their attention to an update from Powell. In remarks prepared for delivery to a congressional hearing on Tuesday morning, the Fed chief said the US economic recovery had progressed "more quickly than generally expected".
"The FOMC last week laid out pretty clearly what the Fed's view is with regard to rates... the next thing that markets will focus on is maybe getting some details from Yellen with regard to further infrastructure investment," said Alex Wolf head of investment strategy for Asia at J.P. Morgan Private Bank, referring to a statement from the Federal Open Market Committee.
A mixed bag of new Western sanctions on China, coronavirus concerns and Turkish tumult after President Tayyip Erdogan's shock sacking of the central bank chief at the weekend left investors awaiting a firmer signal.
In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.66 per cent, hurt by a 0.95 per cent fall in Chinese blue chips as a fresh wave of US and European sanctions related to human rights abuses in Xinjiang hit.
Adding to market jitters were further worries over the efficacy of the AstraZeneca vaccine developed with Oxford University after a US health agency said the drugmaker may have included outdated information in its data.
Hong Kong's Hang Seng Index fell 1.62 per cent and there was a tepid market debut for Baidu, which saw the Chinese tech giant's shares barely trade above their secondary listing price.
Japan's Nikkei fell 0.61 per cent, but emerging markets in the region performed better.
Benchmark 10-year US Treasury notes last yielded 1.6505 per cent, down from 1.732 per cent late on Friday.
The dollar gained slightly against a basket of six major currencies last trading at 92.019, having slipped 0.32 per cent on Monday, while making advances against the kiwi, Aussie and sterling.
Oil also dropped amid ample supply and concerns that new pandemic curbs and slow vaccine rollouts in Europe will slow a recovery in fuel demand.
US West Texas Intermediate crude oil futures dropped 1.07 per cent and Brent crude futures dropped by 1.24 per cent to $US63.90 per barrel.