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.
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 3.3 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 0.4 percent 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. Samsung's shares were up more than 8 percent in the past two days.
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 while gold prices hovered below $930 per ounce.
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 0.3 percent as a stronger yen hit exporter shares, while the Shanghai Composite <.SSEC> shed 0.7 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.
Market reaction was limited so far as hundreds of Uighur protesters clashed with Chinese anti-riot police in the capital of China's Muslim region of Xinjiang on Tuesday, two days after ethnic unrest left 156 dead and more than 800 injured.
Indian markets steadied after a slide the previous day when the government's big-spending budget for the coming fiscal year was viewed as disappointing.
The SENSEX <.BSESN> edged up 0.8 percent after a 6 percent tumble and the rupee inched higher.
But yields on five-year federal bonds jumped to 6.49 percent, taking the two-day rise to 25 basis points on worries about how the market will absorb the bigger issuance to pay for the spending that will boost the deficit to 6.8 percent of GDP.
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 95.30 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 60.50 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, edged up slightly to $0.7967 after the Reserve Bank of Australia sounded an optimistic note in keeping rates on hold at 3 percent.
Australian short-term rates are 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.
We think rates are on hold until toward the end of the year, then we'll see the process of gradually increasing rates from the end of this year, early next year, said Paul Brennan, co-head of market economics at Citigroup in Sydney.
In government bonds, longer-term Japanese government bonds extended their winning streak that has pushed yields sharply lower.
The 10-year yield edged up half a basis point to 1.305 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 Kazunori Takada)