Asian stocks edged up slightly on Tuesday but struggled after a slide the previous day, while the yen held gains against higher-yielding currencies as investors doubt the speed of the global economy's recovery.
A bleak U.S. jobs report last week has prompted portfolio managers to reassess how quickly economies around the world can return to growth after the deep recession, spurring a pull-back in shares and currencies such as the Australian dollar.
Optimism previously shown toward the economy is being scaled back and this is putting a lid on the market. Last week's U.S. employment numbers were a hint that perhaps the market had become over-optimistic, said Takahiko Murai, general manager of equities at Nozomi Securities in Tokyo.
But regional markets have held up as some early news on quarterly earnings showed technology companies faring well.
Taiwan's benchmark TAIEX index <.TWII> gained 1 percent, thanks to a 3 percent jump in shares of smartphone maker HTC <2498.TW> after the company reported a better-than-expected second-quarter profit.
South Korea's KOSPI <.KS11> edged up 0.2 percent a day after Samsung Electronics <005930.KS>, the world's top maker of memory chips and flat screen TVs, forecast second-quarter earnings well above forecasts, giving the broader market a boost.
The yen held near a five-week peak against sterling and the New Zealand dollar as market players have cut holdings of currencies that have surged along with stocks. U.S. crude oil prices were up 15 cents a barrel at $64.20 but hovered near a five-week low.
In Japan, investors have poured cash into government bonds on bets that the economy's recovery from recession will be an extended one that could lead to a long stretch of deflation, pushing benchmark yields to a three-month low.
The MSCI index of Asia-Pacific shares outside Japan edged up 0.4 percent, with technology shares the biggest gainers.
Japan's Nikkei share average <.N225> dipped 0.2 percent, with exporters under pressure from a firmer yen, while the Shanghai Composite <.SSEC> shed 0.5 percent after having reached a 13-month high the previous day.
China's economic resilience and splurge of bank lending to boost growth has fueled the 70 percent rally in the Shanghai Composite so far this year.
Investors were also watching whether Indian markets would extend their slide from Monday after the government's big-spending budget for the coming fiscal year was viewed as disappointing, sparking a 6 percent drop in the SENSEX <.BSESN> and a spike in bond yields.
The dollar was mostly steady and has held its ground in the past few weeks as riskier assets have stumbled, with the U.S. currency favored as a safe haven when market players strike a cautious footing.
The dollar was little changed at 95.36 yen, while the euro drifted sideways at $1.3960.
The New Zealand dollar, which has surged along with its Australian counterpart despite a much weaker economy and record low interest rates, was steady at 60.60 yen after hitting a five-week low of 59.30 yen on Monday.
The Australian dollar, the biggest gainer among major currencies this year as investors crept back into higher-yielding, higher-risk assets, was steady at $0.7960 just before the Reserve Bank of Australia's monthly policy meeting.
The RBA was widely expected to keep rates on hold at 3 percent, among the highest short-term rates of developed economies and one of the reasons for the Aussie's nearly 13 percent surge against the U.S. dollar this year.
In government bonds, longer-term Japanese government bonds extended their winning streak that has pushed yields sharply lower.
The 10-year yield was flat at 1.300 percent after falling to 1.295 percent, the lowest since late March.
The drop in benchmark JGB yields was partly driven by investors selling short-term notes for longer-term bonds, unwinding bets that the yield curve would steepen as short-term yields have become less attractive.
Two-year JGBs were up half a basis point at 0.260 percent but were near their lowest levels in three years.
(Additional reporting by Shinichi Saoshiro in Tokyo)
(Editing by Kim Coghill)