Asian markets were mixed on Tuesday following an upbeat session on Wall Street as investors look to crucial midterm elections that polls show could upend power in Washington.

Shares fell in Hong Kong and Shanghai as speculation about a rollback of China's strict zero-Covid policies fuelled market volatility, even after the government vowed to stick with its harsh lockdowns and testing regimes.

But Tokyo stocks closed 1.3 percent higher, extending rallies in New York, where the dollar also retreated against the pound and the euro.

Early voting has begun in many states and most US voters go to the polls on Tuesday, with a Republican takeover of Congress likely dooming President Joe Biden's ambitious proposals.

Polls show Republicans are likely to win at least one house of Congress -- and some see the prospect of further Washington gridlock as a scenario that lessens the risk of policy uncertainty.

"This may very well be taken as a positive for equity markets over coming days," Clifford Bennett, chief economist at ACY Securities, said in a note.

"The Biden administration, while welcomed to office by financial markets, has nonetheless delivered on being a very big spending government," Bennett said.

"It is difficult to argue the extreme inflation and slowing economy are entirely the Biden administration's fault, but voters will be very clear in their feelings on the matter just the same."

- Not too bullish -

On Monday, US stocks climbed, with the Dow Jones Industrial Average finishing up 1.3 percent and the broad-based S&P 500 rising 1.0 percent.

The next major data point that investors are watching is US inflation data due on Thursday, "which will be the next marker for the (Federal Reserve) on how high to take interest rates," said Stephen Innes of SPI Asset Management.

Before the US Consumer Price Index data is released, "traders are unlikely to live bullish life to the fullest", he predicted.

Seoul gained 1.1 percent, Taipei rose 0.9 percent and Sydney was up 0.4 percent, with Singapore also rising 0.4 percent.

But Hong Kong was down 0.4 percent after jumping nearly three percent in the previous session as investors continued to hope for a relaxation of China's strict Covid-19 rules.

"Speculation about reopening continues to add some market volatility," said Taylor Nugent, an economist at National Australia Bank.

"In a timely reminder of the potential for Covid policy to hit output, Apple warned iPhone shipments will be lower than previously expected after China lockdowns affected operations at a supplier's factory," he noted.

Shanghai closed down 0.4 percent, while Jakarta fell 0.7 percent and Wellington dropped 1.2 percent.

- Key figures around 0700 GMT -

Tokyo - Nikkei 225: UP 1.3 percent at 27,872.11 (close)

Hong Kong - Hang Seng Index: DOWN 0.4 percent at 16,540.25

Shanghai - Composite: DOWN 0.4 percent at 3,064.49 (close)

Pound/dollar: DOWN at $1.1472 from $1.1513 on Monday

Euro/dollar: DOWN at $0.9993 from $1.0023

Dollar/yen: UP at 146.86 from 146.68 yen

Euro/pound: DOWN at 87.10 pence from 87.03 pence

West Texas Intermediate: DOWN 1.2 percent at $91.49 per barrel

Brent North Sea crude: DOWN 0.9 percent at $97.70 per barrel

New York - Dow: UP 1.3 percent at 32,827.00 (close)

London - FTSE 100: DOWN 0.5 percent at 7,299.99 (close)

kaf/smw

NATIONAL AUSTRALIA BANK

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