Shares in Asia inched higher and safe-haven assets gave up some overnight gains on Tuesday, as investors paused for breath after a volatile Wall Street session, but deeper concerns about growth have capped broader improvements in risk sentiment.

Investor focus has shifted to monetary policy this week with Australia's central bank all but certain to cut interest rates to a fresh low at its meeting on Tuesday and India also tipped to ease on Thursday.

Most equity markets in the region shook off Wall Street's overnight weakness, which took the Nasdaq into correction territory. In early trade, MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.17 per cent .

“Sentiment remains downbeat and the weakness across the board in purchasing managers indices, published Monday, helped to feed the anxiety surrounding the outlook for global growth,” analysts at ANZ said in a morning note.

U.S. manufacturing growth slowed further in May to its weakest pace in more than two-and-a-half years, defying expectations for a modest rebound.

Australian shares were up 0.24 per cent ahead of the expected interest rate cut by the Reserve Bank of Australia, as the bank hopes to revive growth.

But Japan's Nikkei gave up early gains to turn down 0.29 per cent.

US Markets

On Monday, the Nasdaq fell 1.61 per cent to 7,333.02, taking it more than 10 per cent lower than its May 3 closing record, as fears that U.S. antitrust regulators could target Alphabet, Facebook and Amazon.com dragged down shares in those companies.

The Dow Jones Industrial Average eked out a 0.02 per cent gain to 24,819.78 and the S&P 500 lost 0.28 per cent to 2,744.45.

Forex market

The cautious gains in equities on Tuesday were accompanied by a rise in the yield on the safe-haven benchmark 10-year U.S. Treasury, which had dipped to 2.0607 per cent , its lowest level since September 2017, on Monday. On Tuesday morning in Asia, 10-year notes yielded 2.0934 per cent , up from a U.S. close of 2.081 per cent on Monday.

The two-year yield turned higher, rising to 1.8597 per cent Tuesday compared with a U.S. close of 1.84 per cent . The yield had fallen earlier, reflecting raised expectations of a more accommodative Federal Reserve. St. Louis Fed president James Bullard on Monday said that a U.S. interest rate cut “may be warranted soon” given risks to global growth posed by trade tensions and weak U.S. inflation.

In further signs that investors' nerves remain unsettled, gold gained 0.12 per cent to $1,326.41 per ounce, just off a three-month high, and Japan's yen strengthened, with the dollar dropping 0.18 per cent against the Asian safe-haven to 107.87.

“Risk aversion has also been seen with the yen carry trade unwinding as the markets comprehend that the U.S. technology containment strategy towards China is unlikely to reverse,” analysts at Jefferies said in a note.

“In the short term, positioning has become so bearish that 'a ceasefire' could spark a risk rally.”

The euro was 0.08 per cent stronger at $1.1249, while the dollar index, which tracks the greenback against a basket of six major rivals, was up 0.05 per cent at 97.186.

Crude prices

Crude prices rebounded after dropping on Monday on mounting trade worries.

U.S. crude gained 0.3 per cent to $53.41 a barrel and Brent crude rose 0.18 per cent to $61.39 per barrel. (Reporting by Andrew Galbraith; Editing by Sam Holmes)

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