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Asian shares were subdued after Wall Street wobbled overnight with markets bracing for key U.S. inflation data on Wednesday, while an oil price spike stoked anxiety about persistent price pressures, complicating the interest rate outlook.

The euro edged higher and markets moved to favour a hike from Europe's central bank on Thursday, following a Reuters report that the European Central Bank (ECB) expects inflation will stay above 3% next year in its updated forecasts, well above its target of 2%.

MSCI's broadest index of Asia-Pacific shares outside Japan was flat while Tokyo's Nikkei eased 0.2%.

Australia's resource-heavy shares lost 0.7%, Chinese blue-chips were flat but Hong Kong's Hang Seng index moved 0.6% higher.

At the forefront of markets' minds is the crucial U.S. Consumer Price Index (CPI) report expected on Wednesday, which should shed further light on the inflation outlook and provide some clarity about whether the Federal Reserve is done tightening.

While core CPI is seen cooling to 4.3% year-on-year in August from 4.7%, rising energy costs are forecast to keep headline inflation hot. And the latest spike in oil prices to ten-month highs is unlikely to escape the Fed's attention.

"What's happening with oil and headline inflation is still too soon for the Fed to be signaling the all clear as far as the risks of some incremental tightening before they're done," said Ray Attrill, a currency strategist at National Australia Bank.

"When you have those sort of volatility in the food and energy components, the worry is that if it's persistent then it does tend to bleed into core inflation measures over time."

Oil prices extended gains on Wednesday. Brent crude futures settled at $92.24 per barrel, nearing a ten-month peak that it hit a session ago on persistent supply concerns. U.S. West Texas Intermediate crude futures were up 0.3% at $89.08. [O/R]

On Wall Street, the S&P 500 fell 0.6% overnight, the Nasdaq declined 1% while Dow Jones was mostly flat.

Apple dropped 1.8% after unveiling new iPhones while not increasing prices as it faces a global smartphone glut, and Oracle shares tumbled more than 13% after the cloud-services provider forecast current-quarter revenue below targets.

The euro firmed 30 pips to $1.0765 on the Reuters story while markets moved to favour a rate hike from the ECB on Thursday with a 75% probability, compared with a split chance previously.

The U.S. dollar recovered some of its recent losses on the yen, up 0.2% to 147.35 yen after comments from Japan's top central banker on a possible early exit from its negative interest rate policy sent the yen soaring. [FRX/]

Treasury yields climbed higher on Wednesday, with the two-year note touching 5.0264%, compared with a U.S. close of 5.005%. Ten-year yields held at 4.2881%, up from the close of 4.264%.

The gold price was flat at $1,912.85 per ounce.