With the world's top economy well on the recovery track, the US central bank has already signalled it will begin to wind back the massive financial support put in place at the start of the pandemic.

But supply chain bottlenecks, surging demand fuelled by reopenings and spiking fuel costs have sent inflation soaring in recent months, putting pressure on bank chiefs to act to prevent prices from running out of control.

An extended period of higher-than-targeted inflation is ramping up expectations that the Fed will have to lift interest rates after it has finished tapering its massive bond-buying programme.

And some analysts are now suggesting the first hike could come as soon as mid-2022, well before the early 2023 originally predicted.

The prospect of higher borrowing costs has put the brakes on a rally across global markets that has run for about a year and a half.

The upcoming earnings season is also being nervously watched for an idea about the impact on company profits from trade bottlenecks and rising inflation, with forecasts for the fourth quarter of particular interest.

"There's real damage that's potentially lurking from the supply chain issues," said John Kilduff of Again Capital. "It's a real potential negative for the global economy."

Wall Street's three main indexes provided a tepid lead, and Asia struggled for direction.

Tokyo, Sydney, Manila and Taipei edged down, though there were gains in Seoul, Singapore, Mumbai, Jakarta and Wellington. Hong Kong was closed because of a typhoon in the city.

Shanghai rose after better-than-forecast export data and ahead of Thursday's release of China's inflation readings, with prices in the world's number two economy also sharply higher.

London, Paris and Frankfurt fell soon after opening.

- Oil concerns -

Oil prices edged down having rallied to multi-year peaks on surging demand, with analysts suggesting that talks between world powers and Iran on the country's nuclear programme provided some respite.

A deal could allow Tehran to start exporting crude globally again, easing some pressure on supplies ahead of the approaching northern hemisphere winter.

Limited stockpiles and the reopening of economies have sent prices of oil and other fuels soaring, raising concerns about the impact on the global economic recovery.

Meanwhile, Democrats' suggestions that they could pare back US President Joe Biden's multi-trillion-dollar infrastructure and social care proposals have lifted optimism they could get the bills through Congress.

"Risks to the outlook are rising and Democrats know they are running out of time," said OANDA's Edward Moya.

"Progressives and moderates don't want to be responsible for disrupting Biden's economic agenda, so it looks like some major concessions will be made shortly."

- Key figures around 0720 GMT -

Tokyo - Nikkei 225: DOWN 0.3 percent at 28,140.28 (close)

Shanghai - Composite: UP 0.4 percent at 3,561.76 (close)

London - FTSE 100: DOWN 0.5 percent at 7,098.14

Hong Kong - Hang Seng Index: Closed because of typhoon

Euro/dollar: UP at $1.1548 from $1.1530 at 2100 GMT

Pound/dollar: UP at $1.3605 from $1.3589

Euro/pound: UP at 84.88 pence from 84.84 pence

Dollar/yen: DOWN at 113.55 yen from 113.62 yen

West Texas Intermediate: DOWN 0.2 percent at $80.50 per barrel

Brent North Sea crude: DOWN 0.2 percent at $83.26 per barrel

New York - Dow: DOWN 0.3 percent at 34,378.34 (close)