Shares, bonds rally as markets await signals for Fed rates

Shares and bonds experienced a relief rally in Asia on Thursday as investors awaited fresh U.S. data and central banker comments that could indicate whether the Federal Reserve would tighten policy in September. Japanese government bond yields dropped to historic lows, following a recovery in Treasuries overnight ahead of an auction of super-long debt in Tokyo.

The yen held onto gains against the dollar. The MSCI Asia-Pacific index outside Japan rose 0.5 percent after U.S. stocks closed with modest gains the previous day. The dollar index fell slightly against a basket of currencies, while the euro and yen showed gains against the greenback. U.S. Treasury yields eased from multi-year highs, reflecting lingering concerns about tighter monetary policy and deteriorating fiscal conditions.

Investors remained cautious amid tensions in the Middle East following a significant escalation of attacks between the U.S. and Iran. The upcoming U.S. payrolls report on Friday is seen as pivotal after private labor data for August disappointed. A Federal Reserve official hinted that a potential rate hike this month remains uncertain.