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Japanese shares led a tentative recovery in Asian shares on Tuesday, drawing some support from two US blockbuster acquisitions and anticipation of more European monetary stimulus.
A day after shock data showing Japan slipping into recession had rattled financial markets, Japan's Nikkei rose 1.4% in early trade, erasing about a half of its 3.0% fall the previous day.
MSCI's broadest index of Asia-Pacific shares outside Japan was flat.
Japan's economy shrank an annualised 1.6% in July-September after a 7.3% slide in the second quarter, when a sales tax hike hit consumer spending.
The data raised doubts over whether Prime Minister Shinzo Abe's policy of massive monetary and fiscal stimulus, while having an early success in boosting asset prices, is helping to boost the real economy.
With Abe expected later in the day to call a snap election, investors are focusing on whether his policies and Liberal Democratic Party (LDP) will continue to gain support from voters.
"While there has been some decline in the support rate for Abe's cabinet there has been no accompanying rise in the support for the opposition from the depressed level. We would therefore expect the main ruling LDP to maintain its majority and for Abenomics to continue," said Miyuki Kashima, managing director at BNY Mellon Asset Management.
"As a result, our positive view on the market remains unchanged," she added.
On Wall Street, the S&P 500 rose slightly to a record closing high on Monday, helped by deal activity worth $100 billion and hopes of more European stimulus.
ECB President Mario Draghi said the central bank is ready for further stimulus if its current efforts are not sufficient to accelerate the region's recovery, adding such new measures could include purchases of sovereign bonds.
The comments came after ECB Executive Board member Yves Mersch said the central bank could theoretically extend purchases to gold, shares, or exchange traded funds (ETFs) or other assets if more action is needed.
"Hopes for an ECB stimulus would underpin European shares. Still, the impact of stimulus would not last that long, as you can see in Japan," said Soichiro Monji, chief strategist at Daiwa SB Investments.
As investors count on the ECB to increase stimulus, they sold the euro, preferring to hold dollars as the US Federal Reserve is expected to raise rates next year.
The euro traded at $1.2445, having slipped from 2 1/2-week high of $1.2580 hit the previous day.
The Japanese yen traded at 116.77 yen to the dollar, near a seven-year low of 117.06 hit in the wake of Monday's shocking GDP data. Gold lost momentum on the dollar's strength, trading at $1,186.30 off a 2 1/2-week high of $1,193.95 hit on Monday.
Oil prices slid as recession in Japan, the world's fourth largest crude importer, added to oversupply worries.
But prices managed to hover above four-year lows as Russia and Venezuela appeared to be coordinating a price defence plan.
US crude futures traded at $75.44 per barrel, off Friday's four-year low of $73.25.
