Asian markets were mixed Friday as investors tentatively await the release of key US jobs data later in the day, following a number of disappointing figures this week that fanned concerns about the world's top economy.
Hong Kong tumbled, with property firms among the worst hit, as demonstrators took to the streets again to protest the imposition of a law banning face masks following months of sometimes violent protests.
Having avoided for the past few years the growth slowdowns suffered in most other countries, a big miss on factory activity and private jobs creation indicated the United States is now feeling the effects of its long-running trade war with China.
On Thursday a measure of the crucial services sector came in at its lowest for three years, ramping up expectations the Federal Reserve will cut interest rates for a third time this year at its October meeting.
The latest data, while missing expectations, provided a lift to Wall Street -- which had plunged more than one percent on Tuesday and Wednesday -- as dealers bet on another reduction.
Expectations are high for such a move.
"A quicker slowing in economic activity will put another brick in the Fed's wall of worries about business confidence and investment and may trigger a significant policy response," said Stephen Innes, Asia-Pacific market strategist at AxiTrader.
"Is bad news good news still? Indeed, that does appear to be the case after the markets fully priced in a Fed rate cut in October and priced in December, suggesting that it's monetary policy that continues to remain one of the essential drivers of investor sentiment."
But OANDA senior market analyst Jeffrey Halley added that while markets "pricing in an almost 100 percent certainty" for a rate cut, the bank could hold its horses for now.
"With trade talks between the US and China restarting next week in Washington it would make complete sense (for the Fed) to see if any progress is made," he said in a note.
- Hong Kong sinks -
Tokyo rose 0.3 percent, Sydney was up 0.4 percent, Seoul fell 0.6 percent, Taipei added 0.2 percent and Wellington gained 0.7 percent.
Manila rallied more than one percent, while there were also gains in Jakarta and Bangkok.
Mumbai fell 0.7 percent after the Indian central bank announced a rate cut as expected but also slashed its economic growth outlook. Shanghai was closed for a holiday.
Hong Kong sank 1.1 percent as the city's government announced the face mask ban as it looks to quell demonstrations that have rocked the economy. But there are worries that the rarely-used colonial-era emergency power could lead to further confrontations or more, stricter laws later.
Henderson Land, Sino Land, Swire Properties and New World Development all lost more than one percent.
"It's the response from protesters to whatever is going to be decided that matters," Jessie Guo, equity research strategist at China Merchants Securities, told Bloomberg News. "The market is concerned that protesters are going to carry on."
The prospect of lower rates weighed on the dollar, which was down against most higher-yielding, riskier currencies such as the South Korean won and Indonesian rupiah.
It was also off against the pound, despite uncertainty about the outlook for Britain's economy after Prime Minister Boris Johnson's latest Brexit plan failed to win over the EU, just weeks before the October 31 Brexit day.
Johnson has warned that he will withdraw without a deal if the two sides do not reach an agreement, which has fuelled concerns about a deep recession in the already stumbling British economy.
In early trade London and Paris each added 0.3 percent, while Frankfurt gained 0.2 percent.