Asian stocks mixed as oil eases off highs amid talks

Debt markets were on edge on Thursday, as Japanese bonds followed Treasuries lower, while Asian equities were mixed as investors weighed simmering Middle East tensions and prospects for talks between the United States and China.

As Tokyo markets reopened after a three-day holiday, the benchmark 10-year Japanese government bond yield jumped to a 30-year high after a steep sell-off in the US market overnight.

Oil prices eased from recent highs and the greenback held gains after Tehran's leader vowed to never surrender following a warning by US President Donald Trump that he could "annihilate" Iran.

Market participants looked ahead to a series of central bank speeches and economic releases, including US jobless claims, for signals on future interest rate hikes. A summit between Trump and Chinese President Xi Jinping was also in focus, with hopes for progress on trade relations.

"Equities are really showing some signs of creaking under the weight of ever-rising bond yields," Ray Attrill, head of FX strategy at the National Australia Bank, said on a podcast. "And in that sort of risk-off environment, it still seems to be the case that the US dollar does find safe-haven support."

The MSCI Asia ex-Japan index fell 0.64 per cent, while Japan's Nikkei 225 rose 1.73 per cent. Australian shares hit a more than three-month low, with the benchmark S&P/ASX 200 index falling 1.2 per cent.

Xi's first trip to the US in nearly three years was not expected to deliver major breakthroughs. Treasury Secretary Scott Bessent said they had reached a deal on a trade extension as Trump greeted Xi personally at Joint Base Andrews in Maryland.

Bond yields have climbed to multi-year highs as traders price in the likelihood of central bank hikes to contend with persistent inflation.

Japan's 10-year government bond yield climbed 8 basis points (bps) to 3.06 per cent, a level not seen since August 1996, and the 30-year yield rose 5.5 bps to 4.12 per cent. The US 10-year Treasury yield held steady at 5.11 per cent, after reaching the highest since 2007 overnight.

Central bank officials maintained a hawkish tone as rising oil prices drove inflationary pressures. Federal Reserve Governor Michael Barr said on Wednesday the central bank's recent rate hike was part of efforts to recalibrate borrowing costs and signalled more increases may be needed.

Markets are anticipating speeches from other Fed officials on Thursday, including New York Fed President John Williams and Fed President Beth Hammack.

Geopolitical tensions kept energy prices elevated. Iranian officials communicated with US envoys at the UN General Assembly, but both sides signalled little progress toward ending the conflict. Trump reiterated threats of further escalation, while Iran's president vowed not to yield.

Brent crude fell one per cent to $US102.05 a barrel, while US West Texas Intermediate slipped 0.74 per cent to $US91.48 a barrel. Spot gold gained 0.35 per cent to $US4,301.89 an ounce.

The US dollar index fell 0.04 per cent to 101.09, while the euro slipped 0.02 per cent to $US1.14. The Japanese yen strengthened 0.24 per cent to 157.91 per dollar.