Equities have enjoyed a broadly healthy run-up so far this month as recent data suggested the US economy was holding up after 10 straight rate hikes but the Fed had enough room to skip another increase this month.

However, a surprise lift by the Bank of Canada on Wednesday -- a day after Australia lifted rates to an 11-year high -- dealt a blow to those hopes and reminded investors that more work was still needed to fight still-too-high inflation.

The Fed's June 14 decision comes just after the release of figures on the consumer price index, which could play a major part in policymakers' thoughts, with the board still split on whether or not to pause.

"Canada's central bank is viewed as one of the leaders when it comes to being proactive with monetary policy," said OANDA's Edward Moya.

"They were the first to raise rates in 2022 and then put them on hold earlier this year. The BOC is signalling that more rate hikes could come and that has everyone rethinking that the Fed will be done after the July hike."

The news compounded the already gloomy mood on trading floors following weak trade data out of China and the United States as well as subdued German industrial production.

Wall Street's tech firms, which are susceptible to higher borrowing costs -- took the heaviest hit Wednesday, sending the Nasdaq down more than one percent.

However, SPI Asset Management's Stephen Innes said: "Given the global recessionary landscape, particularly a potential disinflationary wave emanating from China, it is questionable if now is the time for central banks to tighten the screws."

The Reserve Bank of India held rates Thursday, as expected.

In Asian trade, Sydney, Seoul, Singapore, Wellington, Taipei, Manila and Mumbai were all in the red.

Tokyo dropped after enjoying a healthy rally in recent months, while data showing Japan's economy expanded more than initially thought in the first three months of the year was unable to provide enough support.

London opened with gains while Paris and Frankfurt dipped.

Hong Kong and Shanghai rose on hopes for some policy support from Chinese authorities to kickstart the torpid economy as the initial boost from the removal of zero-Covid fades.

Observers said the People's Bank of China could announce a rate cut as early as this month, having this week asked major lenders to lower their deposit rates.

That came after reports last week said officials were looking to ease some rules in the property sector, where a number of firms are straining under the weight of massive debts.

Comments from the country's securities regulator that he wanted to further open up markets added to the upside pressure for mainland assets.

Jakarta and Bangkok were also slightly higher.

- Key figures around 0715 GMT -

Tokyo - Nikkei 225: DOWN 0.9 percent at 31,641.27 (close)

Hong Kong - Hang Seng Index: UP 0.2 percent at 19,285.48

Shanghai - Composite: UP 0.5 percent at 3,213.59 (close)

London - FTSE 100: UP 0.1 percent at 7,634.75

Euro/dollar: UP at $1.0711 from $1.0696 on Wednesday

Pound/dollar: UP at $1.2445 from $1.2431

Dollar/yen: DOWN at 139.85 yen from 140.24 yen

Euro/pound: UP at 86.06 pence from 86.03 pence

West Texas Intermediate: UP 0.1 percent at $72.63 per barrel

Brent North Sea crude: UP 0.1 percent at $77.01 per barrel

New York - Dow: UP 0.3 percent at 33,665.02 (close)