Traders took a breather from the global rally that has lifted several indexes to record highs over recent weeks as they await the Federal Reserve decision and post-meeting comments by bank boss Jerome Powell.

While a 25-basis-point reduction -- the first of 2025 -- has been baked into valuations for some time, the main debate has revolved around how many more are in the pipeline and how big they will be.

Expectations for an extended period of easing have grown out of a string of data showing the US labour market is not in as much of a healthy state as first thought.

That comes even as inflation remains stubbornly above the Fed's two percent target, though the feared spike in inflation caused by US President Donald Trump's tariff war has not yet fully materialised.

Economists expect to see divisions among decision-makers as they try to walk the line between tempering inflation and supporting jobs.

The economic picture means officials could dissent in both directions even if most vote for a 25 basis points cut -- a situation not seen since 2019.

"That's not a good place to be," said KPMG chief economist Diane Swonk, adding that there were worries about both inflation and a recession.

"It's the stagflation reality that we're living in now," she said, even if it is just a "mild bout". This refers to a situation of sluggish growth and rising prices.

Data Tuesday showing US retail sales surged far more than forecast in August did little to dampen optimism for cuts.

Still Asian traders were cautious on Wednesday, after a tepid day on Wall Street.

Hong Kong led gains, climbing more than one percent thanks to a rally across Chinese tech giants such as Alibaba, JD.com and Tencent, while Shanghai, Manila, Mumbai, Bangkok and Jakarta were also higher.

But there were losses in Seoul -- which came off several successive records -- Sydney, Wellington and Taipei. Tokyo closed down.

London opened up, as did Paris and Frankfurt.

"Markets remain in somewhat of a holding pattern ahead of the Federal Reserve's decision tonight," eToro market analyst Josh Gilbert said.

"The biggest risk is that the Fed sounds less dovish than markets are hoping for."

Gold prices hovered just short of their record above $3,700 touched Tuesday as the likelihood of lower rates makes the precious metal more attractive to investors.

The impact of Trump's tariffs on Japan were revealed Wednesday by data showing the country's exports to the United States plunged almost 14 percent last month, the biggest drop since 2021.

The fall included a collapse of more than 28 percent in auto shipments, dealing a blow to a crucial driver of the world's fourth-largest economy.

- Key figures at around 0715 GMT -

Tokyo - Nikkei 225: DOWN 0.25 percent at 44,790.38 (close)

Shanghai - Composite: UP 0.4 percent at 3,876.34 (close)

Hong Kong - Hang Seng Index: UP 1.66 percent at 26,876.19

London - FTSE 100: UP 0.1 percent at 9,209.21

Euro/dollar: DOWN at $1.1843 from $1.1868 on Tuesday

Pound/dollar: DOWN at $1.3632 from $1.3657

Dollar/yen: UP at 146.63 yen from 146.49 yen

Euro/pound: FLAT at 86.88 pence from 86.87 pence

West Texas Intermediate: DOWN 0.2 percent at $64.36 per barrel

Brent North Sea Crude: DOWN 0.2 percent at $68.31 per barrel

New York - Dow: DOWN 0.3 percent at 45,757.90 (close)

dan/abs/jm

INDEX CORP.

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