Losses in Japan, China and a Hong Kong tech index sapped on an Asian equity gauge. US contracts wavered after Wall Street shares declined for the first time in four days, including a more than 1% drop in the Nasdaq 100 index.

Fed officials saw a need to eventually dial back the pace of interest-rate increases and warned against over-tightening that could hurt the economy, but also flagged the risk of inflation pressures becoming entrenched.

The advance in Treasuries lowered the 10-year yield to about 2.87%. Australia’s currency weakened following an unexpected tumble in employment numbers.

Swaps tied to Fed policy meeting dates indicated lower odds of a 75 basis points hike next month as opposed to a half-point move. Expectations of slower policy tightening and a pivot to cuts later next year have already contributed to a 12% jump in global stocks from June lows. The question is whether that’s too optimistic. A darker scenario is of persistent price pressures forcing restrictive borrowing costs even as the economy shrinks.

“People are a little overly optimistic about how likely it is that we can solve the inflation problem quickly and in a way where we don’t have to include more policy and more rising rates,” Kathryn Kaminski, AlphaSimplex Group chief research strategist and portfolio manager, said on Bloomberg TV.

Meanwhile, Goldman Sachs Group economists downgraded their forecast for China’s full-year expansion to 3% from 3.3%. The nation is hamstrung by a property crisis, rolling Covid curbs and lately stressed power supply.

“We still have to absorb what’s going on in China and get more transparency,” Loreen Gilbert, WealthWise Financial chief executive officer, said on Bloomberg Television. “We may be looking in the two-handle instead of three on GDP. That is a steep decline in the Chinese economy and that has not been priced in either domestically for China or globally.”

The US and Taiwan started formal negotiations on a bilateral trade initiative, a step which risks inflaming already high tensions with China. 

Elsewhere, oil hovered around $88 a barrel, gold advanced and Bitcoin was little changed.