HONG KONG: Asian stock markets struggled for momentum on Thursday, after heavy gains this week, as expectations for a pause in Fed policy tightening remained intact despite U.S. data pointing to strength in parts of the economy.

U.S. economic data this week has left investors in the same state of confusion about Fed policy as they have been in for weeks. Retail sales proved strong while producer prices inflation, coming soon after the below-forecast core inflation, reinforced the disinflation theme and supported views of a peak in U.S. rates.

"With inflation, labour market and retail sales data now published for this month, and expectations for an FOMC hike in December and January priced at zero, a huge amount of information has been digested by markets in a very short time," analysts at ANZ said in a note.

"A period of consolidation seems warranted, especially if Fed officials push back against the recent easing in financial conditions."

Early in the Asian trading day, MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.2%. The index is up 7.1% so far this month.

Australian shares were down 0.33%, while Japan's Nikkei stock index slid 0.36%.

The MSCI Asia ex-Japan index, MSCI Emerging Market index and Nikkei all posted their biggest gains in a year, of 2.5% or more, on Wednesday.

Chinese industrial and retail numbers calmed nerves and lifted mainland stocks on Wednesday, with both data beating expectations in October even as the underlying economic picture highlighted significant pockets of weakness with the crisis-hit property sector continuing to forestall a full-blown revival.

China's blue-chip CSI300 index was 0.1% lower in early trade. Hong Kong's Hang Seng index dropped 0.35%.

While markets didn't react specifically to the news, investors also heard from the first meeting in a year between U.S. President Joe Biden and Chinese leader Xi Jinping on Wednesday, that the two leaders had agreed to resume military-to-military communications and cooperate on anti-drug policies.

On Wednesday, U.S. stocks closed slightly higher, as the inflation data reinforced investor hopes the Fed is done raising interest rates, while retail stocks were boosted by an upbeat forecast from Target.

The Dow Jones Industrial Average rose 0.47%, the S&P 500 gained 0.16% and the Nasdaq Composite narrowed earlier gains to end flat.

Money market traders have fully priced in the odds that the U.S. central bank will keep rates steady in December, as per CME Group's Fedwatch tool. They also see the first rate cut of the cycle to kick off in May 2024.

Investors are increasingly pricing in more rate cuts next year with bond yields and the dollar coming under downward pressure. Some of that reversed on Wednesday, with Treasury yields and the dollar rebounding slightly from the previous session's fall.

The yield on benchmark 10-year Treasury notes was at 4.5117% compared with its U.S. close of 4.537% on Wednesday. The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 4.8991% compared with a U.S. close of 4.916%.

In currencies, the European single currency was up 0.1% on the day at $1.0852, having gained 2.61% in a month, while the dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was up at 104.33.

U.S. crude dipped 0.55% to $76.24 a barrel. Brent crude fell to $80.75 per barrel.

Gold was slightly lower. Spot gold was traded at $1958.49 per ounce.

(Reporting by Julie Zhu and Vidya Ranganathan; Editing by Lincoln Feast.)