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Asian share markets tried to regain their footing on Thursday after a steep sell-off, while a rally in Treasuries dented the dollar and lifted the yen as U.S. economic worries raised the odds of the Federal Reserve going big on rate cuts.

Oil prices were steady in early trading after dropping in the previous sessions on weak demand and supply woes, while gold edged higher. [GOL/] [O/R]

In a data-packed week, investors are poring over the reports dropping in to gauge the health of the U.S economy and the labour market, with a weak manufacturing data on Tuesday and Wednesday's mixed labour data keeping markets on edge.

Japan's Nikkei fell 0.5% to its lowest in three weeks, although tech-heavy Taiwan and South Korean stocks were both 1% higher after sliding on Wednesday.

That helped lift MSCI's broadest index of Asia-Pacific shares outside Japan by 0.6%, having tumbled nearly 3% over the course of a three-day losing streak.

Investor attention on Thursday will be on a reading on the U.S. services industry with jobless claims data. The main focus for the week though will be on Friday's hotly anticipated August report for nonfarm payrolls.

The payrolls report is expected to provide the clearest clues as to where the economy is headed and whether the Fed will cut interest rates this month by a quarter or a half of a percentage point.

Markets are now pricing in a 44% chance of the Fed cutting rates by 50 basis points at its Sept. 17-18 meeting, up from 38% a day earlier, CME FedWatch tool showed. Traders are now anticipating 110 bps of easing this year from the three remaining Fed meetings.

The latest change in markets expectations comes after data released on Wednesday showed U.S. job openings dropped to a 3-1/2-year low in July, suggesting the labour market was losing steam.

Ryan Brandham, head of global capital markets for North America at Validus Risk Management, said the data supports the Fed’s recent shift to focusing on the employment side of its dual mandate.

"But this does not change our view that the risks are skewed towards the Fed cutting less, not more, than what is currently priced in by the market."

San Francisco Fed President Mary Daly said the Fed needs to cut interest rates to keep the labour market healthy, but it is now down to incoming economic data to determine by how much.

The odds of an economic contraction are now much less than it was last year as the Fed seems ready to respond to any threats with deeper rate cuts if necessary, according to Vasu Menon, managing director of investment strategy at OCBC.

"What’s also going for the U.S. economy and the Fed, is the loose financial conditions which should support the economy and allow the U.S. central bank to cut rates gradually and steadily without panicking."

In the currency market, the dollar remained on the defensive, with investors fleeing risky assets in search of safety. The Japanese yen was one of the biggest beneficiaries and was last at 143.56 per dollar, having already gained nearly 2% for the week so far.

The Swiss franc, also a traditional safe-haven currency, steadied at 0.8461 per dollar.

Treasury yields were calm in early Asian hours on Thursday after diving in the previous session. [US/]

Two-year note yields were last at 3.775% after hitting 3.772% on Wednesday, the lowest since May 2023. Benchmark 10-year note yields were last at 3.767%.

In commodities, Brent crude futures rose 0.45% to $73.03 after dropping 1.42% in the previous session. U.S. West Texas Intermediate crude futures were up 0.52% to $69.56 after sliding 1.62% on Wednesday.