SYDNEY - Chinese shares recoiled on Monday after regulators took steps to rein in speculative lending there, while investors everywhere were wary of being disappointed by the latest efforts at policy stimulus in the euro zone.
A holiday in the United States also made for thin conditions at the start of a week littered with major data and a crunch council meeting for the European Central Bank.
In China, financial shares were slugged as Beijing cracked down on credit products that have been blamed for fuelling excessive market speculation over the past three months.
The Shanghai market shed 6.4 per cent, while the CSI300 index of the largest listed companies in Shanghai and Shenzhen slid 6.5 per cent.
MSCI's broadest index of Asia-Pacific shares outside Japan erased early gains to be down 0.1 per cent, even as markets across much of the region edged higher.
Australia's main index firmed 0.2 per cent and Japan's Nikkei added 0.8 per cent. European bourses were also expected to open with modest gains.
Adding to the air of caution was Sunday data showing Chinese new home prices in December fell an average 4.3 per cent year-on-year in 68 of the 70 major cities monitored.
Though property sales volumes picked up, massive inventories of unsold homes were expected to keep pressure on the sector and the economy well into 2015.
That was just an appetiser to Tuesday's report on gross domestic product which is expected to show China's annual growth slowed to 7.2 per cent in the last quarter, meaning full-year growth would undershoot Beijing's 7.5 per cent target and would be weakest in 24 years.
But the main event of the week will be Thursday's meeting of the ECB, which is considered almost certain launch a government bond-buying campaign in a bid to fight off deflation.
Sources have told Reuters the ECB may adopt a hybrid approach - buying debt and sharing some of the risk across the euro zone while national central banks make separate purchases of their own.
There has also been talk the programme would be limited in size to 500 billion euros, an amount that would almost certainly disappoint investors eager for bold measures.
"The market is baying for action from the ECB on Thursday, with expectations now firmly entrenched in favour of a QE (quantitative easing) announcement," said James Ashley, chief European economist at RBC Capital Markets.
Ashley suspects the ECB will not put an amount on the bonds to be bought and will rather refer to the current objective of expanding its balance sheet to 3 trillion euros.
But with consumer prices falling, even that might not be enough.
"We think that the 3 trillion goal will need to be raised at some point in the future - and with that, so too will the amount of asset purchases," said Ashley.
Just to make the challenge all the greater, the Greek general election is due on Jan. 25 and could see the anti-bailout Syriza party win but without a controlling majority.
All this uncertainty kept the euro pinned at $1.1555, having hit an 11-year low of $1.14595 on Friday.
The common currency was shaky on the Swiss franc at 1.0020 after tumbling 17 per cent last week when the Swiss National Bank abandoned its cap on the franc.
The dollar was a shade softer against the safe-haven yen at 117.00, but a touch firmer on a basket of currencies around 92.669.
Oil prices had a soft tone as Brent crude futures eased 26 cents to $49.91, while US crude lost 28 cents to $48.41 a barrel.