Asian shares shed early gains from a strong Wall Street lead on Wednesday, as some investors booked profits on a stellar run to record highs, but hope for additional US economic stimulus and a coronavirus vaccine kept market sentiment well supported.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.06%, pulling back from last week's all-time high. Australian stocks erased early gains and fell 0.38%.
Shares in China fell 0.22%. Tokyo stocks fell 0.17% after setting a new 29-year high. South Korean shares bucked the trend and rose 1.11% due to signs of an increase in semiconductor demand.
US stock futures declined 0.4% following a record closing high for Wall Street shares.
Benchmark US Treasury yields eased slightly but remained near a three-week high as Republicans and Democrats submitted proposals for economic stimulus in a bid to pass a bill some time this month.
Analysts say further downside for global equities is likely limited, with major uncertainties surrounding the outlook now fading.
"We've had some positive leads, and a combination of optimism around the vaccine, and government and central bank stimulus remains in place," said Michael McCarthy, chief markets strategist at CMC Markets. "It's a sweet spot for markets."
MSCI's gauge of stocks across the globe rose 0.07% in Asia on Wednesday, edging toward an all-time high.
Pfizer Inc and Germany's BioNTech SE sought emergency approval of their vaccine candidate from the European regulator on Tuesday. Competitor Moderna Inc also applied for emergency approval from the European regulator on Tuesday.
Pfizer and BioNTech said their vaccine could be launched in the European Union as early as this month, though a European regulator clouded the schedule when it said it would complete its review of their vaccine by Dec. 29.
US legislators also indicated progress on economic stimulus. Top US Senate Republican Mitch McConnell said on Tuesday that Congress should include a new coronavirus stimulus in a $1.4 trillion spending bill aimed at heading off a government shutdown in the midst of a pandemic.
The US 10-year Treasury yield stood at 0.91% in Asia, not far from a three-week high of 0.9380% hit in the previous session as investors priced in the likelihood of more fiscal spending.
The spread between two-year and 10-year yields was also near its steepest in three weeks.
Higher yields did not support the dollar, which was mired near its lowest level in more than 2-1/2 years as investor appetite for risk increased.
Oil prices extended losses in Asian trading after OPEC and its allies left markets in limbo by postponing a formal meeting to decide whether to lift output in January.
Brent crude futures fell 0.53% to $47.16 per barrel, while US crude fell 0.63% to $44.27 per barrel.