By Tom Westbrook
SINGAPORE (Reuters) – Bond yields drifted higher on Tuesday, while currencies and Asia’s stock markets steadied as investors waited on a raft of knowledge to find out how deeply the U.S. can cut rates of interest.
Ten-year Treasury yields were barely higher at 3.919% and two-year yields rose a basis point to three.935% as trade resumed in Asia following a U.S. holiday overnight.
Upbeat spending figures on Friday led markets to trim the possibility of a half-point easing from the Federal Reserve. The U.S. ISM manufacturing survey due later within the day and particularly jobs data due on Friday shall be crucial for the Fed’s decision.
MSCI’s broadest index of Asia-Pacific shares outside Japan ticked 0.1% lower. Japan’s Nikkei rose 0.7% and S&P 500 futures were flat. The dollar has steadied together with U.S. yields as focus turns to Friday.
“It really boils right down to Friday’s number,” said Raisah Rasid, global market strategist at J.P. Morgan Asset Management in Singapore, with policymakers in search of a cooling labour market to clear the best way for rate cuts.
“We do not see any stress or indications that may necessitate a 50 basis point cut…the query is how long will risk assets proceed to rally?”
Economists forecast the ISM survey improving but remaining in contractionary territory at 47.5 in August.
“I’m not so sure the dollar will take too kindly to a weaker read,” said Pepperstone analyst Chris Weston. “A number closer to 50 would likely compel dollar shorts to cover.”
On Friday analysts are in search of an increase of 160,000 in jobs and a dip within the unemployment rate to 4.2%.
The dollar was firm at 146.85 yen and traded at $1.1063 per euro within the Asia session. Rallies within the Australian and Latest Zealand dollars paused for breath, with the Aussie held just under $0.68.
In Hong Kong, shares in property company Latest World Development slumped to a two-decade low after the corporate estimated a $2.6 billion loss for the 12 months to June.
In Australia, Woolworths shares fell 3% a day after the supermarket operator said it might sell its remaining stake in a series of liquor shops.
Gold hovered at $2,494 an oz after hitting a record high above $2,500 in August.
Oil prices have struggled for traction as demand worries weigh against tension within the Middle East and Brent crude futures slipped 0.5% to $77.13 a barrel.
(Reporting by Tom Westbrook; Editing by Shri Navaratnam)