Stocks tiptoe toward US manufacturing, jobs data

By Tom Westbrook

SINGAPORE (Reuters) – Bond yields rose on Tuesday as Asian currencies and stock markets steadied as investors awaited a series of data to determine how deeply the U.S. may cut interest rates.

Ten-year Treasury yields were slightly higher at 3.919 percent and two-year yields rose a basis point to 3.935 percent as trade resumed in Asia after an overnight US holiday.

Upbeat spending figures on Friday led markets to discount the chance of a half-point easing from the Federal Reserve. The US ISM manufacturing survey due later in the day and especially the jobs data due on Friday will be crucial to the Fed’s decision.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.1 percent. Japan’s Nikkei rose 0.7 percent and S&P 500 futures were flat. The dollar steadied along with US yields as attention turns to Friday.

“It really comes down to Friday’s number,” said Raisah Rasid, global market strategist at JP Morgan Asset Management in Singapore, with policymakers looking for a labor market to clear the way for rate cuts.

“We don’t see any stress or cues that would require a 50 basis point cut … the question is how long will risk assets continue to recover?”

Economists expect the ISM survey to improve but remain in contractionary territory at 47.5 in August.

“I’m not so sure the dollar will take a weaker reading too well,” said Pepperstone analyst Chris Weston. “A number closer to 50 would likely force dollar shorts to cover.”

On Friday, analysts were looking for an increase of 160,000 jobs and a drop in the unemployment rate to 4.2 percent.

The dollar was firm at 146.85 yen and traded at $1.1063 per euro in the Asian session. Rallies in the Australian and New Zealand dollars paused for breath, with the Aussie held just below $0.68.

In Hong Kong, shares of real estate company New World Development fell to a two-decade low after the company reported a loss of $2.6 billion for the year to June.

In Australia, Woolworths shares fell 3% on the day after the supermarket operator said it would sell its remaining stake in a chain of liquor stores.

Gold settled at $2,494 an ounce after hitting a record high of more than $2,500 in August.

Oil prices struggled to hold up as demand worries offset tensions in the Middle East, and Brent crude futures fell 0.5 percent to $77.13 a barrel.

(Reporting by Tom Westbrook; Editing by Shri Navaratnam)