Asia shares dragged lower by China, dollar on back foot

Asian shares were dragged lower by China on Friday amid little guidance from Wall Street which was closed for a holiday, while the dollar remained on the back foot as investors bet US rates have peaked.

The yen was little changed after data showed Japan's core consumer inflation picked up again in October, although by less than expected, and factory activity shrank for a sixth straight month.

MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.4 per cent but are headed for a weekly gain of 0.9 per cent. It is up a whopping 7.1 per cent so far in November as investors grew increasingly confident that the US rates have peaked, with discussions shifting to the timing and speed of future rate cuts.

Japan's markets returned from a holiday, with Nikkei climbing 1.0 per cent to charge towards a 33-year high hit on Monday.

Chinese bluechips fell 0.3 per cent while Hong Kong's Hang Seng index tumbled 1.3 per cent, reversing the previous day's hefty gains. Chinese developers listed in Hong Kong lost 0.7 per cent, after jumping 6.4 per cent on Thursday on more support measures from Beijing to prop up the beleaguered industry.

“Since share markets rebounded so quickly, they became technically overbought, so it's quite possible we go through a period of consolidation in markets,” said Shane Oliver, chief economist at AMP.

“You get the talk of the so-called Santa rally, but often times Santa rally doesn't really occur in the last two weeks of December. So we could have a couple of weeks with the markets sort of just meandering around and lacking direction.”

Overnight, US markets were closed for the Thanksgiving holiday. In Europe, slightly better than expected euro zone PMIs nudged the euro and shares higher and Sweden's crown dropped as its central bank left rates on hold.

Minutes of the European Central Bank October policy meeting showed euro zone inflation falling as expected, or even a bit faster, but suggested policymakers needed to keep the possibility of an interest rate hike on the table.

Cash Treasuries fell a little as they resumed trading in Asia, with two-year Treasury yields up 2 basis points to 4.9338 per cent and benchmark ten-year yields up 4 bps to 4.4568 per cent.

In the currency markets, the dollar was on the back foot against its peers at 103.71, nearing a three month low of 103.17.

The sterling perched near a 2-1/2 month top at $US1.2575 ($A1.9171), as strong results from a business survey led markets to push back bets on when the first rate cut from the Bank of England might come.

Oil prices were mixed after tumbling more than 1 per cent on concerns over the delayed OPEC+ meeting. Brent crude futures were up 0.3 per cent at $US81.69 ($A124.54) a barrel while US West Texas Intermediate crude fell 0.6 per cent to $US76.65 ($A116.85) a barrel.

Gold prices was flat at $US1,992.75 ($A3,037.97) per ounce.

(Reporting by Stella Qiu. Editing by Sam Holmes)