Asian shares eked out small gains and the euro steadied on Thursday, reflecting investor caution over sovereign funding for troubled euro zone economies Spain and Italy, despite their declining yields that helped global equities rebound overnight.
An encouraging start to the earnings season helped U.S. stocks snap a five-day losing streak, spurring investors to scale back safe haven buying of gold and U.S. and German government debt on Wednesday, but further selling of these perceived safe assets weakened in Asia on Thursday.
Ten-year Treasury yields inched down 1 basis point while gold was steady at $1,658 (1,040.80 pounds) an ounce.
MSCI's broadest index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> emerged into positive territory to inch up 0.2 percent after strong Australian employment data, having earlier hovered near a 10-week low hit on Wednesday.
The Australian dollar jumped 0.5 percent to the day's high near $1.0370 and Australian shares extended gains <.AXJO> after Australian employment far outpaced expectations by surging 44,000 in March while the unemployment rate stayed at 5.2 percent, suggesting the economy was faring better than many had feared.
Japan's Nikkei average <.N225> was up 0.1 percent, trimming earlier gains but off its lowest in nearly two months touched the day before. <.T>
The Nikkei is up on a technical rebound after prices fell to bargain levels, but until investors start focusing on earnings from last fiscal year, European debt worries will continue to weigh and dictate market direction, said Tetsuro Ii, the president of Commons Asset Management in Tokyo.
Along with recent data from the United States and China suggesting a slowdown in economic recovery, resurfacing worries about Spain's fiscal woes as well as Italy persisted despite a better-than-expected sovereign debt auction by Italy and supportive comments from a European Central Bank official on Spain.
The reprieve may prove to be temporary, Barclays Capital analysts said in a research note. (We) remain concerned about sustained appetite for peripheral European debt amid waning foreign demand in an increasingly fragmented market.
ITALY AUCTION EYED
Investors will use a 5 billion euro bond sale by Italy later on Thursday to gauge market risk tolerance.
Yields on Spanish and Italian sovereign debt are still well below the highs of 2012 when they breached the critical levels, while dollar funding rates in Europe have remained stable.
The euro crept higher against the dollar, reaching a one-week high of $1.3158 before retreating to $1.3120, leaving the currency within the $1.3030-$1.3165 range seen in the past week.
The relief could be felt more globally, but it was limited in scope indicating that we remain in a roller coaster and are not at the end of it yet, said Sebastien Galy, strategist at Societe General.
The Federal Reserve on Wednesday provided an reassuring assessment of the U.S. economy in its latest Beige Book summary of national activity, after Friday's data showing a sharp slowdown in U.S. jobs creation in March triggered a sell-off in global markets earlier this week.
U.S. economic activity kept growing moderately in the late winter months, but rising energy prices were beginning to worry manufacturers and retailers across the country, the Fed said.
Oil slipped on Wednesday, with Brent futures down 0.1 percent at $120.04 a barrel and U.S. oil futures off 0.2 percent at $102.49.
Asian credit markets steadied, with the spread on the iTraxx Asia ex-Japan investment-grade index barely changed from Wednesday.
(Additional reporting by Ian Chua in Sydney; Editing by Ron Popeski)