Tokyo, Japan – Asian stocks eased on Wednesday ahead of key US economic data, with investors taking a cautious stance amid rising concerns over inflation.

Markets in China, Japan, and South Korea were all in negative territory, while Hong Kong’s Hang Seng index was flat. The declines followed a weaker Wall Street session overnight, in which US stocks slipped after data showed rising prices for goods and services.

Market analysts said the focus was squarely on inflation, with investors looking for signs of whether rising prices could crimp economic growth and prompt central banks to tighten monetary policy.

“The big concern for markets right now is inflation,” said Sarah Li, an analyst at financial services firm Daiwa Securities. “Investors are worried that rising prices could crimp consumer spending and hurt economic growth.”

The cautious mood also came ahead of the release of minutes from the Federal Reserve’s latest policy meeting, which could shed light on the central bank’s thinking on inflation and interest rates.

“Traders will be scouring the Fed minutes for any sign of whether policymakers are growing more concerned about inflation and whether they may need to tighten policy sooner than expected,” said Li.

Despite the cautious mood, some investors remained optimistic about the outlook for Asian stocks amid expectations of a sustained economic recovery.

“Long-term investors are looking beyond the short-term uncertainties and focusing on the fact that Asia is well positioned to benefit from a global recovery,” said Liam Chen, an investment strategist at Goldman Sachs.

The Nikkei 225 in Tokyo was down 0.5%, while the Shanghai Composite Index was off by 0.3%. The Kospi in Seoul was down 0.2%, while the Hang Seng in Hong Kong was unchanged.

Investors were also watching developments in the coronavirus pandemic, which has continued to weigh on markets amid concerns over rising case numbers in India and other parts of Asia.

“We’re still in a fragile situation with the pandemic, and that’s putting a damper on sentiment,” said Chen. “But overall, we’re seeing signs of a sustained recovery, which is a positive for investors in the long term.”