By Rae Wee
SINGAPORE (Reuters) -Asia shares rose on Thursday, reversing a steep selloff from the previous session after better-than-expected U.S. economic data drew investors back into markets trading near record highs.
Yields on U.S. Treasuries meanwhile held overnight gains as traders further trimmed bets of a Federal Reserve rate cut next month, which in turn kept the dollar supported near a five-month peak.
Data on Wednesday showed the U.S. services sector activity increased to an eight-month high in October as new orders grew solidly, while private payrolls rose 42,000 last month, exceeding expectations.
“We actually are not too worried about the job market,” said Keiko Kondo, head of multi-asset investments for Asia at Schroders.
“Market is tight, companies are probably investing more in technology, probably not necessarily hiring more people, but not firing people either. So probably the way that even the economy and the labour market operate is changing a bit.”
That helped lift Wall Street overnight as jitters over inflated technology stock valuations abated and upbeat company earnings also restored investors’ risk appetite.
In Asia, Japan’s Nikkei was up 1.5% after sliding 2.5% on Wednesday. South Korea’s Kospi also jumped more than 2% shortly after the open, having tumbled 2.85% in the previous session.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.32%.
Stock markets suffered a heavy selloff in Asia on Wednesday as concerns about stretched valuations spooked investors, though most said the slide was little cause for panic.
“I think the market is still quite healthy, but at the same time, it was definitely due for a bit of a pullback,” said Kondo.
Nasdaq futures were down 0.25% while S&P 500 futures eased 0.12%, giving up some of their gains from the overnight cash session.
EUROSTOXX 50 futures dipped 0.05%. DAX futures edged 0.02% higher.
On the tariff front, U.S. Supreme Court justices raised doubts on Wednesday over the legality of President Donald Trump’s sweeping tariffs, in a case with implications for the global economy that marks a major test of Trump’s powers.
FED CUT BETS EASE
The 10-year U.S. Treasury yield was last at 4.1474%, having risen nearly seven basis points in the previous session, while the two-year yield stood at 3.6192%.
Adding to upward pressure on long-term yields, the U.S. Treasury Department on Wednesday said it expected to keep its nominal coupon and floating rate note auction sizes steady for at least the next several quarters, but was beginning to consider future increases.
The higher yields offered some support to the dollar, which dipped slightly on Thursday but didn’t stray too far from a more than five-month top hit in the previous session.
Wednesday’s upbeat U.S. economic data releases have led to traders now pricing in a roughly 60% chance of a Fed cut in December, down from about 70% earlier in the week.
“The odds of a December Fed funds rate cut are drifting further south,” said Jose Torres, senior economist at Interactive Brokers.
“The anticipation of the awaited economic updates, which have been reduced in frequency due to the extended government shutdown, is also supporting the greenback’s climb.”
Against the yen, the dollar was down 0.15% to 153.86. The euro was up 0.11% at $1.1507.
Sterling gained 0.07% to $1.3061, ahead of the Bank of England’s rate decision later in the day.
In commodities, oil prices edged slightly higher, with Brent crude futures up 0.05% at $63.55 a barrel, while U.S. crude ticked up 0.08% to $59.65 per barrel. [O/R]
Spot gold fell 0.3% to $3,969.30 an ounce. [GOL/]
(Reporting by Rae WeeEditing by Shri Navaratnam)
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