SYDNEY (Reuters) - Asian markets were mostly under water on Thursday as never-ending speculation about the fate of U.S. stimulus lifted bond yields globally, while Japanese shares struggled to find their footing after a spill.
Moves were modest ahead of central bank meetings in the European Union and UK, and the latest read on U.S. economic growth, not to mention the payrolls numbers on Friday.
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"Starting from two days back, people are starting to get quite nervous about the market," a Tokyo-based senior trader at a European bank said.
The dollar has also faded below 103.00 yen, giving investors an excuse to book profits on the market's recent hefty gains. The Nikkei is still up 9 percent since early November, and 48 percent on the year so far.
Offshore funds appeared to be cheering for the market. Foreigners bought a net 368 billion yen worth of Japanese shares in the week through November 30, on top of 709 billion yen in the week before that.
Caution ruled elsewhere in the region, with MSCI's broadest index of Asia-Pacific shares outside Japan off 0.3 percent, and Shanghai down 0.1 percent.
Australia's main index shed 0.8 percent as Qantas Airways tumbled as much as 15 percent on news of a profit warning and job cuts.
There was nothing but indecision out of Wall Street where the Dow Jones industrial average edged down 0.16 percent, while the S&P 500 eased 0.13 percent.
Shares had taken a hit after a strong reading on private hiring led to speculation that payrolls could also be upbeat and perhaps hasten the day when the Federal Reserve starts trimming its asset buying.
Other data on services and housing was more mixed, but the risk was enough to leave 10-year Treasury yields near three-month highs at 2.84 percent.
Ironically, a sustained increase in long-term yields is exactly what the Fed is trying to avoid, so the rise argues against a start of tapering at this month's policy meeting.
The lift in yields helped the U.S. dollar regain some ground on the yen to stand at 102.35, up from a low of 101.82. It may get further support if U.S. gross domestic product data gets revised up later Thursday.
A major mover was the Canadian dollar which sagged to 3-1/2-year lows after the Bank of Canada issued a dovish policy statement, highlighting the risks of undesirably weak inflation.
The euro was steady at $1.3585, having bounced from a trough of $1.3527 on Wednesday. Service sector data had showed activity in Italy and France shrinking in November but expanding in Spain and Germany, highlighting the divergence in the bloc.
There was more good news for Spain as Moody's upgraded its credit outlook to stable from negative, citing a rebalancing of and a brighter medium-term view for the country's economy.
Investors were now looking ahead to a policy meeting by the European Central Bank. While the consensus is that the central bank will not announce any new measures, markets are nervous after being taken off guard by November's rate cut.
"The focus will be on the presentation of staff projections for 2014 and 2015, and in particular on inflation forecasts," said Philippe Gudin, an analyst at Barclays.
If the region's recovery continues, the ECB may be done easing for this cycle.
"Should economic activity fail to gain momentum or deflation concerns materialize, we think further monetary easing would be decided," added Gudin. "Although this is not our baseline scenario, we think the probability is non-negligible."
In commodity markets, spot gold edged back to $1,238, giving up some of Wednesday's 1.7 percent rally.
U.S. crude added another 23 cents to $97.43, on top of a 1.2 percent rally on Wednesday after data showed domestic crude stocks fell by 5.6 million barrels, snapping 10 straight weeks of builds. Going the other way, Brent crude eased 21 cents to $111.67 a barrel.
(Editing by Eric Meijer and Richard Pullin)