Most Asian equity markets edged lower after a choppy session Thursday, with Japanese, South Korean and Indian shares influenced by overnight weakness on Wall Street and worries about corporate earnings. Shanghai-listed stocks declined, taking a breather after a three-day rally, even as shares of Chinese banks rallied in Hong Kong on expectations that government policies may help support the mainland economy. Shipping shares surged across the region after a jump in a key index signaled improved dry bulk shipping rates. "There was obviously opportunism about China growth, commodities and shipping. On the downside, we had weakness from Japanese corporate earnings and downgrades and from Macquarie on the banking side. ... But by the end of the day negative sentiment won the battle," said Andrew Sullivan, a sales trader at Main First Securities. Japan's Nikkei 225 finished the day 1.1% lower, South Korea's Kospi lost 1.5%, Australia's S&P/ASX 200 gave up 0.3% and China's Shanghai Composite declined 0.5%, unable to latch on to their early gains. In afternoon trading, India's Sensex lost 1.6% and Singapore's Straits Times slipped 0.3%, while Taiwan's Taiex ended 0.6% lower. Despite solid gains in the morning session, Hong Kong's Hang Seng Index ended up just 0.9%, while the Hang Seng China Enterprises index, which measures performance of Chinese large-capital stocks, finished up 3%. "Even though the performance of overseas markets remains quite unstable, investors are expecting that the Chinese economy will recover faster," said Ben Kwong, chief operating officer at KGI in Hong Kong. "But I remain skeptical it's a sustainable trend." "The fact is everybody is pinning their hopes on China and that means that [they are] putting all their eggs in one basket," added Main First's Sullivan. Banking stocks led the gains in Hong Kong, with Bank of China jumping 3.9% and Industrial & Commercial Bank of China gaining 3.9%. "The banks are particularly strong today, given that some figures indicate that loan growth in China has been very strong in January," said Marco Mak, head of research at Tai Fook Securities in Hong Kong. Overall trade was cautious after the Dow Jones Industrial Average Wednesday closed below 8,000 for only the third time this year, amid concerns about fading U.S. consumer demand. After-hours in the U.S., Cisco Systems fell 4.4% after it warned of an even sharper fall in revenue for the third quarter as the downturn took its toll on customer orders. That weighed on U.S. stock futures, with Nasdaq futures down 2%. There was also some unease before January U.S. non-farm payrolls data, due Friday, which a Dow Jones Newswires survey of economists indicates is expected to show a loss of 525,000 jobs. "Despite recent positive leading indicator releases and aggressive central bank actions, credit problems remain and the weakening U.S. economy will continue to be a drag on the world, particularly on export-oriented countries," said analysts at UBS. Shipping stocks rally Shipping shares showed some heft after the Baltic Dry Index gained 14.6% to 1,316 on Wednesday, helped in part by tentative signs of a recovery in Chinese demand for commodities. "Shipping shares will continue to gain as long as the Baltic index continues to recover," said Mitsuru Miyazaki, an analyst at SMBC Friend Research Center, noting that current BDI levels were still not profitable for shippers.

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