Asian shares wobbled while the dollar was perched near a three-month top on Thursday after a spate of economic data overnight appeared to support Federal Reserve Chairman Jerome Powell's hawkish guidance on further interest rate increases.
The caution is set to extend to Europe ahead of the release of the February U.S. payrolls data, with pan-region Euro Stoxx 50 futures dipping 0.2%. Both S&P 500 futures and Nasdaq futures were off 0.2%.
In his second day on Capitol Hill, Powell stuck to his message of higher and potentially faster interest rate hikes, but emphasised that debate was still underway with a decision hinging on data to be issued before the U.S. central bank's policy meeting in two weeks.
MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) dipped 0.1% on Thursday, after falling 1.4% the previous session. Japan's Nikkei (.N225), on the other hand, rose 0.6%.
In the United States, data released overnight painted a picture of a sturdy economy, doing little to assuage fears the Fed will ease up on its relentless rate hikes.
Job openings remain elevated, private payrolls beat consensus estimates and demand for home loans increased despite higher mortgage rates.
"It's hard to see this as clarifying the employment picture ahead of tomorrow's payrolls release, which remains a lottery," said Robert Carnell, regional head of research, Asia Pacific at ING.
"Although essentially the same message, Powell's tone yesterday to Congress was regarded by many commentators as slightly softer, noting that data would be the final arbiter of the size of the next hike and that no decision on the size of the March hike had yet been made."
The major U.S. stock indexes oscillated between modest gains and losses throughout the day, with the Nasdaq joining the S&P 500 in positive territory at the closing bell and the Dow posting a modest loss.
Investors are now focused on February jobs data due on Friday for confirmation that strong jobs growth supports bigger rate increases.
Forecasts are centred on a more modest increase of 205,000 after January's 517,000 jump led markets to reprice their monetary tightening expectations.
Financial markets have priced in a 78.6% likelihood of a 50 basis point hike to the key interest rate at the conclusion of the Fed's March meeting, up from about 30% at the beginning of the week, according to CME's FedWatch tool.
The U.S. dollar index, measuring the greenback's value against a basket of major peers, hovered close to a three-month top at 105.57. It, however, lost 0.4% to the Japanese yen at 136.78 per dollar.
Japan's lower house of parliament on Thursday approved the government's nominee Kazuo Ueda to be next central bank governor, signing off on a new leadership that will be tasked with steering a smooth exit from ultra-loose monetary policy.
The Bank of Japan is, however, expected to maintain ultra-low interest rates on Friday.
Ten-year government yields again hit the BOJ's policy cap of 0.5% on Thursday.
The greenback was also buoyant against the Canadian currency at $1.3803 Canadian dollars, the highest level in four months, thanks to a dovish Bank of Canada, which
The central bank on Wednesday left interest rates on hold, becoming the first major central bank to suspend its monetary tightening campaign.
On Thursday, the two-year Treasury yields held close to 15-year highs at 5.0600%, while the benchmark 10-year yields were mostly steady at 3.9953%.
A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, was at a negative 108.2 basis points, the most inverted since 1981. Such an inversion is seen as a reliable recession indicator.
Oil prices were largely steady on Thursday. U.S. crude held at $76.64 a barrel. Brent crude was largely unchanged at $82.66 per barrel.
