Asian stocks were mostly down on Thursday following a weak lead from Wall Street, though better-than-expected manufacturing data from China provided a glimmer of good news for local markets.
The three main US stock indices lost ground on Wednesday, and Asian investors appeared to be in a risk-averse mood ahead of a coin-toss US election and after a widely expected decision by the Bank of Japan to leave its main interest rate unchanged.
Tokyo fell by half a percent, weighed down by a stronger yen and a drop in stocks linked to the semiconductor industry, which also dipped on Wall Street.
The Bank of Japan said in an outlook report accompanying its rate announcement that there were "high uncertainties surrounding Japan's economic activities and prices".
Its decision to stand pat came after an election that saw the ruling coalition lose its majority in the lower house for the first time since 2009.
Businesses and economists worry that Prime Minister Shigeru Ishiba will offer tax cuts and higher spending, and go slow on reforms needed to improve Japan's competitiveness as he courts support from other parties.
There are also concerns that the government may pressure the BoJ to take a break from its gradual normalisation of its ultra-loose monetary policy, even if it leads to a weaker yen.
The bank raised borrowing costs in March for the first time since 2007, and did so again in July.
It signalled Thursday that it would raise rates yet again if inflation developed as it expected, and noted it was paying "due attention" to other economies, particularly the United States, where the presidential election takes place on November 5.
Seoul was well down on Thursday, with Hong Kong, Sydney, Wellington, Mumbai and Manila in the red as well.
Stephen Innes of SPI Asset Management attributed Asian markets' wobble to pre-vote "jitters", saying traders were "wary of taking on new risk as the US election countdown begins".
"The fear? A Trump win could trigger fresh tariffs on Asian exports, sending ripples across the region," he wrote.
Paris, London and Frankfurt also began the day with losses.
Mainland Chinese markets, however, bucked the trend, with healthy gains in Shanghai and Shenzhen following a forecast-beating manufacturing report from China.
Factory output expanded this month for the first time since April, official data showed Thursday, rare good news for leaders struggling to boost activity in the world's second-largest economy.
The country is battling sluggish domestic consumption, a persistent crisis in the property sector and soaring government debt -- all of which threaten Beijing's official growth target of five percent for this year.
"The PMIs have overstated the weakness in China's economy during the past year," Julian Evans-Pritchard of Capital Economics said in a note.
"The good news is that, after turning a corner in September, the official surveys point to a further improvement in October, with an acceleration in manufacturing and services activity more than offsetting a further slowdown in construction."
Jakarta and Bangkok were also up, while Taipei was closed due to a typhoon.
Uncertainty over the outcome of the upcoming US elections, meanwhile, buoyed safe haven gold, which touched a fresh high just shy of $2,790 an ounce on Thursday.
And oil prices continued their rebound in Asian trade, fuelled by good news on demand from the United States, as well as by press reports that OPEC countries are considering postponing an increase in crude supply.
Tokyo - Nikkei 225: DOWN 0.5 percent at 39,081.25 (close)
Hong Kong - Hang Seng Index: DOWN 0.3 percent at 20,317.33 (close)
Shanghai - Composite: UP 0.4 percent at 3,279.82 (close)
London - FTSE 100: DOWN 0.6 percent at 8,109.11
Euro/dollar: DOWN at $1.0859 from $1.0861 on Wednesday
Pound/dollar: UP at $1.2988 from $1.2969
Dollar/yen: DOWN at 152.05 yen from 153.35 yen
Euro/pound: DOWN at 83.61 from 83.75 pence
Brent North Sea Crude: UP 0.1 percent at $72.63 per barrel
West Texas Intermediate: UP 0.1 percent at $68.66 per barrel
New York - Dow: DOWN 0.2 percent at 42,141.54 points (close)
