Most Asian stock markets slipped on Monday after three consecutive weeks of gains as a retreat in oil prices made investors cautious, but losses were tempered by hopes that China may soon cut interest rates again as pressure on the yuan eases.

The wobbles in the oil market, a general downturn in commodities and cooling growth in China have rattled financial markets in recent months.

Fears about the outlook for global growth were also instrumental in the US Federal Reserve's move last week indicating a slower path for future rate increases.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.3 per cent after entering positive territory for the first time this year on Friday. It is up 16 per cent from January's lows. Japanese markets were closed for a holiday.

"Despite the current rally in risk, we are more inclined to be broadly bearish on emerging markets given the underlying weakening trend," said Frances Cheung, head of rates strategy, Asia ex-Japan at Societe Generale in Hong Kong.

Stocks in China and Hong Kong rose, but equity markets elsewhere in the region edged lower with Taiwan and Australia leading losses.

In the absence of any fresh major economic data in a holiday-shortened week, investors were left to ponder the softer tightening bias from the Fed even as the US economic recovery appeared to be gathering fresh steam.

Dollar bulls were hit hard last week after the Fed's less hawkish stance which cut the projected rate hikes for the rest of the year by half to only two. Financial markets, as seen by money market futures, are barely pricing in one.

Fed Chair Janet Yellen sounded doubtful that a recent firming in US inflation would be sustained, suggesting the central bank is in no hurry to tighten policy.

Some such as Francis Cheung, China strategist at brokerage CLSA, said the Fed's renewed caution would encourage Beijing to pursue with its own stimulus measures to boost the economy. He expects an interest rate cut in the second quarter.

"We see this rally continuing until the second quarter with property materials, internet and industrials sectors in demand," CLSA's Cheung said pointing to relatively cheap valuations.

On a trailing price-to-earnings basis, the MSCI Asia ex-Japan is trading at 12.3 times, nearly one standard deviation below its 20 year average. At 9.3 times, Hong Kong's stock market was trading comfortably below one standard deviation its 20-year average.

China's economy is showing signs of improvement while capital outflows from the country are moderating, top Chinese officials said on Sunday.

Easing outflows and the softer dollar are resulting in less pressure on the yuan currency, which could give the central bank more confidence to cut interest rates and banks' reserve requirements again after largely weak data in January and February, some market watchers say.

However, softer oil prices dampened sentiment.

Oil slipped for a second session, extending Friday's slide of over 1 per cent after the U.S rig count rose for the first time since December, renewing worries of a supply glut after an output freeze proposal had helped boost the market to 2016 highs.

US West Texas Intermediate (WTI) futures fell more than 1 per cent to $39.01 per barrel after briefly topping $41, its highest since last December.

Brent crude edged lower to $41.04 per barrel after hitting this year's peak of $42.54 per barrel.

Rate markets also cheered the Fed's cautiousness with 10-year and two-year US yields down by 14 and 16 basis points since the US central bank's meeting last week.

Credit markets basked in the afterglow of the recent rally with an index of high-yield credit extending gains to be up 9 per cent in roughly a month.

In currencies, the dollar index was little changed at 95.01, not far from a five-month trough of 94.578 set on Friday.

The greenback fetched 111.31 yen, still within reach of Friday's 17-month low of 110.67. The euro, which last week scaled a one-month peak of $1.1342, stood at $1.12830.

The Australian dollar consolidated gains after hitting its highest level in nine months last week at 0.7681 per dollar. It was changing hands at 0.7591 on Monday. – Reuters