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HONG KONG  - Asian shares stepped back on Thursday after a sharp rebound this week, though a solid Wall Street performance overnight contained losses in the region as rising vaccinations offset some of the worries over persistently high COVID-19 cases worldwide.

The global inflationary pulse was also in the headlines as the South Korean central bank raised its base rate by 25 basis points to 0.75%, the first major economy in Asia to do so, after Sri Lanka hiked its base rate last week.

In early trading MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.22%, with declines in Chinese bluechips off 0.81%, Hong Kong down 0.31% and Australia shedding 0.49%.

Japan's Nikkei gained 0.04%. Korea's Kopsi was little affected by the central bank hike, falling 0.31% in line with regional moves.

Central banks around the world are laying the groundwork for a transition away from crisis-era stimulus as what began as emergency support for collapsing growth now overheats many economies.

The Asian stock benchmark is still up around 4% on the week, having largely joined a rally in global markets as investors look to the upcoming Jackson Hole Symposium for assurances that the Federal Reserve won't be rushing in to tighten policy.

However any further gains in equity markets will be limited and a correction is likely by the end of the year, a Reuters poll of analysts found.

Asia is also lagging the rest of the world this year. The MSCI world equity index, which tracks shares in 50 countries is sitting very close to record highs, while the MSCI Asia ex Japan benchmark is off over 12% from record highs hit in February.

"Asia would be doing a lot better if it were not for the Delta outbreak. However, we've seen at various times over the last 18 months where different regions have led and lagged depending on where they are in relation to Covid-19," said Shane Oliver, Chief Economist at AMP.

Vaccinations have started to pick up in a number of the countries, raising hopes for the outlook although the rates are still relatively low.

Many countries in the region, from Korea to Southeast Asia and Australia are grappling with a surge in cases of the Delta variant of the new coronavirus, where as the United States could get COVID-19 under control by early next year if vaccinations ramp up, the top U.S. infectious disease expert said on Tuesday.

Overnight, U.S. shares inched higher with the S&P 500 closing at its 51st record high of the year, gaining 0.22%. The Dow Jones Industrial Average closed up 0.11% and the Nasdaq Composite added 0.15%. [.N]

Chipmakers and financials drove the gains, helped by a rise in U.S. treasury yields, with the rate on benchmark 10-year Treasury notes rising to 1.349%, the highest since Aug. 13. They last yielded 1.3424%.

"The rock and roll of the thin conditions sees markets swing from pessimistic to optimistic in a matter of days," said CBA analysts in a note.

"Yields have bounced a fair way from recent lows, catching some on the hop. The market is settling into position ahead of the Jackson Hole meeting on Friday."

Investors remained focused on what Fed Chair Jerome Powell might say on Friday about tapering the central bank's bond-buying program when he speaks at the Jackson Hole symposium.

The dollar was little changed in Asian hours sitting around a week low against a basket of major peers, amid the more positive mood in the United States.

Oil prices fell on Thursday after three days of gains. U.S. crude dipped 0.59% to $67.96 a barrel. Brent crude fell 0.43% to $71.93 per barrel