The Australian sharemarket shrugged off a rally to a record high on Wall Street and firmer Chinese stocks as caution mounted following another Chinese debt default and lack of Chinese stimulus news.
The S&P/ASX 200 index traded sideways for much of the session before closing 14.1 points, or 0.26 per cent, up at 5403.3.
Overnight the US S&P 500 index rose 0.7 per cent after the ISM manufacturing index rose, but missed forecasts, supporting the outlook for the tentative US recovery.
The global outlook has deteriorated, however, with the JP Morgan Global PMI slipping to 52.4 points from 53.2.
Standard Life Investments analysts said "almost everywhere one looks at the moment" there was a story highlighting global deflationary risks.
They said metal prices were falling, core inflation in the eurozone has declined to a post-monetary union low, and the various measures of underlying inflation in the US continued to surprise to the downside, but the risks could be overstated.
"Much of the recent deterioration in inflation has been due to weak global growth and rising excess capacity in goods producing sectors," they said. "With the economic cycle now turning in the developed economies, we are likely to see wage growth gradually pick up, which will eventually feed through into consumer prices."
The Shanghai composite index was up 0.4 per cent at the close of the ASX as property developers rallied despite interbank lending costs rising for the seventh day and reports of a "junk bond" default.
Building materials producer Xuzhou Zhongsen Tonghao New Board missed a 10 percent coupon payment due March 28 on the 180 million yuan ($32 million) of notes it sold last year.
In Tokyo the Nikkei index jumped 1.7 per cent as the yen tumbled.
Copper initially jumped one per cent but settled back to a 0.3 per cent gain at $US6680 a tonne following reports of an earthquake offshore Chile, the world's biggest copper producing country.
Gold was steady at $US1283 an ounce while spot iron ore rose 0.5 per cent to $US117.60 a tonne on Tuesday.
More to come