Asia markets were mixed Tuesday morning, with eyes on China after the central bank's surprise reserve requirement ratio (RRR) cut to free up liquidity.

Japan's benchmark Nikkei 225 shed 1.05 percent. The South Korean market is closed for a public holiday.

Chinese markets wavered between positive and negative after the RRR cut and worse-than-expected manufacturing data, with the Shanghai composite up by 0.31 percent, while the Shenzhen composite gained 0.7 percent. Hong Kong's Hang Seng Index added 0.28 percent.

Australia's S&P/ASX 200 see-sawed between positive and negative before trading flat, with most sectors gaining. The heavily weighted financials sector was up 0.33 percent, while the energy sector gained 0.9 percent.

Miners mostly rebounded, with Rio Tinto gaining 2.28 percent, Fortescue up 6.13 percent and BHP Billiton adding 1.86 percent. Gold miner Newcrest was up 5.66 percent, with spot gold trading up 0.18 percent at USD 1,240.40 an ounce.

Before market open, Japan released a slew of economic data that gave mixed signals. Household spending for January was down 3.1 percent on-year in price-adjusted real terms. The drop was steeper than the forecast for a 2.7 percent decline from a Reuters poll of economists. On the other hand, the seasonally adjusted unemployment rate in January dropped to 3.2 percent, better than the market expectation for 3.3 percent.

The yen maintained its strength against the dollar, remaining in the 112 handle. The pair traded down 0.4 percent at 112.20 as of 9.54 a.m. HK/SIN time. Exporters were mostly down, with Honda falling 0.85 percent and Sony down 3 percent. Usually, a stronger yen is a negative for exporters as it reduces overseas profits when converted into local currency.

Data on the mainland was also concerning. Chinese government data showed activity in large factories contracted for the seventh straight month in February. The official manufacturing Purchasing Managers' Index (PMI) was at 49.0, lower than the market's forecast of 49.3. January's official manufacturing PMI reading was at 49.4.

China's official services PMI fell to 52.7 in February, from 53.5 in January.

There were no wild swings in Asian equities following the release of the economic data from Japan and China. But analysts caution that the rally in risk assets is looking tired.

Singapore's DBS bank said in a note on Monday, "The global rally in risk assets could run out of fuel soon."

The note suggested chart readings, or technicals, which had been supporting the risk-asset rally from early February, are turning ambivalent, and out of steam.

"Optimists might hold out for supportive policies or communication from the European Central Bank's (ECB) 10 March policy meeting. And there is also the U.S. Federal Reserve's Federal Open Market Committee (FOMC) meeting on 15-16 March. But short of anything dramatic, risk asset markets are likely to resume downwards," the note added.

Adding to that, the lack of direction for the economy and markets from last weekend's G-20 meeting in Shanghai has some skeptics seeing "the meeting's statement as an implicit admission of the failure of monetary policy," DBS said.

Earlier, the People's Bank of China (PBOC) set the yuan midpoint at 6.5385 to the dollar, with the yuan stronger than Monday's fix of 6.5452. The yuan strengthened against the dollar, with the pair trading down 0.18 percent at 6.5409 as of 9.40 a.m. HK/SIN time.

On Monday evening local time, the central bank further cut its reserve ratio requirement (RRR). The RRR sets out how much of depositors' capital banks must hold as cash, so cutting the rate allows more money to flow into the financial system. Reuters reported that the 0.5 percentage point cut implied most large Chinese banks would have a reserve ratio of 17 percent.

Worries about liquidity had caused Chinese markets to slump last week. Pang expects high volatility in both the foreign exchange market and the equity market. On Monday, the Shanghai composite closed down 2.87 percent after falling over 4 percent earlier in the session.

Analysts at Goldman Sachs said in a separate note that in the very short term, the RRR cut may boost market sentiment, "given this is the first major (and publicly announced) monetary easing since October 2015, against a corrective and arguably short-term oversold market backdrop."

But, Goldman Sachs analysts added, the market's return trajectory will likely "stay challenging in the medium term."

US crude lost ground during Asian hours, down 0.62 percent at $33.54 a barrel, after settling up 3 percent overnight.

The May contract for Brent was down 0.85 percent at USD 36.26 as of 9.52 a.m. HK/SIN time, after settling up 3.2 percent overnight.

During US hours, global benchmark Brent crude's front-month April contract settled up 87 cents, or 2.5 percent, at USD 35.97 a barrel before expiring and going off the board.

Energy plays across Asia were mostly up, with Santos adding 2.11 percent, Woodside Petroleum up 1.14 percent and Japan Petroleum gaining 0.41 percent.

Mainland Chinese oil plays were mixed, with Sinopec up 1 percent and Petrochina down 0.96 percent.

Overnight, major US indexes closed lower, with the Dow Jones industrial average down 0.74 percent. The S&P 500 was off 0.81 percent, while the Nasdaq composite fell 0.71 percent.

The Reserve Bank of Australia will also announce its interest rate decision later today.

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First Published:Mar 1, 2016 7:51 AM IST