Asian shares fell and European markets were set to follow
suit , while the dollar held firm after strong US data and
comments from a Federal Reserve governor fanned expectations of an
interest rate hike in September.
Dollar-denominated MSCI's broadest index of Asia-Pacific shares outside Japan slid 0.8% at 08:06.
Financial spreadbetters expected Britain's FTSE 100 to open down 0.6%.
The Bank of England is likely to say on Thursday that its policymakers were split over interest rates, raising expectations that it is heading for its first increase in rates in nearly a decade.
Germany's DAX was seen opening down by 43-54 points, while France's CAC 40 was expected to open down by 25 points lower.
Jonathan Sudaria, dealer at Capital Spreads in London, said traders were wary with so much data pointing in different directions, yet central banks looking firmly intent on taking their first steps along an interest rate hike cycle. "Traders are understandably treading cautiously," he wrote in a note to clients.
The Shanghai Composite Index lost almost 1%, after news China's banking regulator estimated that banks' bad debts had jumped 35.7% from a year earlier to $289.92bn as of the end of June.
Japan's Nikkei index, the only Asian market in positive territory, pared gains to 0.2%, on China's losses. South Korea's Kospi slid 3.1%.
Overnight, Wall Street shares mostly edged higher, helped by both data showing US service sector growth surged to a decade high in July, and by solid corporate results in Europe.
The US Institute for Supply Management's services sector index rose to 60.3, its highest level since August 2005, far beyond expectations for a 56.2 reading.
The data supported expectations that the Federal Reserve will raise rates in September, more than offsetting weaker-than-expected US private hiring figures for July also published on Wednesday.
Atlanta Fed chief Dennis Lockhart, a voting member at the US central bank's policy committee, also said it would take "significant deterioration" in the US economy for him to not support a rate hike in September.
The US currency cleared strong resistance around ¥124.50 to hit a two-month peak of ¥125.015 on Wednesday. It last stood at ¥124.73.
The euro also slipped to two-week low of $1.0847 on Wednesday before bouncing back to $1.0923.
"The focus for now would be how risk assets such as emerging currencies and stocks will cope with the prospects of a US rate hike," said Minori Uchida, chief currency strategist at the Bank of Mitsubishi-Tokyo UFJ.
Investors are worried that weaning off decade-long zero interest rates on the dollar could prove tough for some emerging economies and companies that have taken cheap dollar funding for granted.
Elsewhere in the markets, few investors seemed worried about US share moves. US shares' volatility index, seen as a measure of investors' anxiety, briefly fell below 11%, its lowest level in more than a year.
Financial spreadbetters expected Britain's FTSE 100 to open down 0.6%.
The Bank of England is likely to say on Thursday that its policymakers were split over interest rates, raising expectations that it is heading for its first increase in rates in nearly a decade.
Germany's DAX was seen opening down by 43-54 points, while France's CAC 40 was expected to open down by 25 points lower.
Jonathan Sudaria, dealer at Capital Spreads in London, said traders were wary with so much data pointing in different directions, yet central banks looking firmly intent on taking their first steps along an interest rate hike cycle. "Traders are understandably treading cautiously," he wrote in a note to clients.
The Shanghai Composite Index lost almost 1%, after news China's banking regulator estimated that banks' bad debts had jumped 35.7% from a year earlier to $289.92bn as of the end of June.
Japan's Nikkei index, the only Asian market in positive territory, pared gains to 0.2%, on China's losses. South Korea's Kospi slid 3.1%.
Overnight, Wall Street shares mostly edged higher, helped by both data showing US service sector growth surged to a decade high in July, and by solid corporate results in Europe.
The US Institute for Supply Management's services sector index rose to 60.3, its highest level since August 2005, far beyond expectations for a 56.2 reading.
The data supported expectations that the Federal Reserve will raise rates in September, more than offsetting weaker-than-expected US private hiring figures for July also published on Wednesday.
Atlanta Fed chief Dennis Lockhart, a voting member at the US central bank's policy committee, also said it would take "significant deterioration" in the US economy for him to not support a rate hike in September.
The US currency cleared strong resistance around ¥124.50 to hit a two-month peak of ¥125.015 on Wednesday. It last stood at ¥124.73.
The euro also slipped to two-week low of $1.0847 on Wednesday before bouncing back to $1.0923.
"The focus for now would be how risk assets such as emerging currencies and stocks will cope with the prospects of a US rate hike," said Minori Uchida, chief currency strategist at the Bank of Mitsubishi-Tokyo UFJ.
Investors are worried that weaning off decade-long zero interest rates on the dollar could prove tough for some emerging economies and companies that have taken cheap dollar funding for granted.
Elsewhere in the markets, few investors seemed worried about US share moves. US shares' volatility index, seen as a measure of investors' anxiety, briefly fell below 11%, its lowest level in more than a year.
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