Asian shares retreat as investors question US economic strength

Australian shares were down 0.21%, while Japan's stock index slid 0.77%.

Hong Kong's was flat in early trade and China's off 0.16%.

The on benchmark 10-year reached 4.4001% compared with its U.S. close of 4.402% on Monday. The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 4.8184% compared with a U.S. close of 4.818%.

On Monday, U.S. yields fell to the lowest point in two weeks, after the country's manufacturing activity slipped for the second consecutive month in May.

The 2-year yield was 6 basis points lower while the 10-year yield was down 11 basis points.

"The sharper move at the long-end is a sign that weaker manufacturing data is unlikely to shift the dial on near term, but is perhaps a signal of the market's view of neutral as US economic exceptionalism fades," Westpac economist Jameson Coombs said in a note on Tuesday.

There was now 40 basis points of rate cuts by the end of 2024 priced into expectations, he added.

In Europe, investors expect the on Thursday to cut the benchmark rate by 25 basis points to 3.75%.

On Wall Street, the S&P 500 index edged up 0.1%, the Dow Jones Industrial Average shed 0.3%, and the Nasdaq Composite rose 0.6%.

In India, Prime Minister Narendra Modi is expected to win a record-equalling third consecutive term in office on Tuesday when the 642 million votes cast in the world's largest election are counted.

The outcome is expected to be positive for the country's financial markets, according to analysts, on the hope India will under further economic reform.

The dollar rose 0.16% against the yen to 156.35 in Asian trading on Tuesday. It is still some distance from its high this year of 160.03 in late April.

The European single currency was up 0.1% on the day at $1.0912, having gained 0.65% in a month, while the dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was down at 104.

U.S. crude dipped 0.42% to $73.91 a barrel. Brent crude fell to $78.05 per barrel. Both benchmarks slid to four-month lows on Monday after the Organization of the Petroleum Exporting Countries and allies, together known as OPEC+, agreed to start unwinding some production cuts from October.

"Most commodity analysts had expected the production cuts to be maintained till the end of the year," NAB economists said.

Gold was slightly higher. Spot gold was traded at $2350.7266 per ounce.