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Chinese authorities pledge more support for economy

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Fed outlook remains top of investors' minds

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Dollar, US yields steady near milestone highs

(Updates to Asia afternoon)

By Rae Wee

SINGAPORE, Dec 24 (Reuters) - Asian stocks edged up on

Tuesday, though moves were subdued in a holiday-curtailed week,

while the greenback held near a two-year high helped by elevated

U.S. Treasury yields as investors prepared for fewer Federal

Reserve rate cuts in 2025.

In China, stocks extended gains slightly on the back of news

of more support from Beijing to shore up the country's

stuttering economic recovery.

The CSI300 blue-chip index and Shanghai

Composite Index last traded 0.9% higher each. Hong

Kong's Hang Seng Index advanced 1.08%.

Two sources told Reuters that Chinese authorities have

agreed to issue 3 trillion yuan ($411 billion) worth of special

treasury bonds next year, which would be the highest on record.

Chinese government bond yields ticked up in response, with

the 10-year yield gaining two basis points to

1.7125%.

The news came shortly after the country's finance

ministry said authorities will ramp up fiscal support for

consumption next year by raising pensions and medical insurance

subsidies for residents as well as expanding consumer goods

trade-ins.

Still, investors remain cautious on the outlook for the

world's second-largest economy, particularly as it faces the

threat of hefty tariffs from U.S. President-elect Donald Trump.

"China faces significant challenges entering 2025. The

ongoing real estate crisis has shattered consumer confidence

while a potential trade war with the United States could trigger

the worst growth slowdown in decades," said Ronald Temple, chief

market strategist at Lazard.

"Investor expectations have been raised and dashed more than

once in China in recent years, and 2025 may prove to be no

different. China's economic and market outlook might largely

depend on the speed and magnitude of government reforms."

Elsewhere, MSCI's broadest index of Asia-Pacific shares

outside Japan rose 0.44%, tracking Wall Street's

overnight gain.

EUROSTOXX 50 futures ticked up 0.04%, while FTSE

futures rose 0.46%. S&P 500 futures and Nasdaq

futures each lost 0.05%.

Japan's Nikkei fell 0.24%.

Nippon Steel's ( NISTF ) $15 billion bid for U.S. Steel

has been referred to U.S. President Joe Biden, a White House

spokesman said, giving the president 15 days to decide on a tie

up he has previously said he opposes.

Shares of Nippon Steel ( NISTF ) last traded 1.2% higher.

FED FOCUS

After a recent run of central bank decisions, this week is

much quieter, leaving the rates theme the main driver of market

moves, with the dollar's continued strength a burden for

commodities and gold.

Markets are now pricing in just about 35 basis points of

easing for 2025, which has in turn sent U.S. Treasury yields

surging and the dollar to new highs.

The two-year Treasury yield last stood at

4.3427%, while the benchmark 10-year yield steadied

near a seven-month high at 4.5907%.

"Like markets, the Fed will need to consider U.S. policies

on tariffs and immigration in its inflation and growth outlook.

We believe the subtle slowing in the U.S. labor market will

still be the Fed's paramount concern," said analysts at Citi

Wealth.

"While always uncertain, our base case expectation for a

3.75% policy rate is unchanged. It's a far cry from the 1.7%

U.S. policy rate average of the past 20 years."

Ahead of Trump's return to the White House in January,

global central banks have urged caution over their rate paths

due to uncertainty on how his planned tariffs, lower taxes and

immigration curbs might affect policy.

Data on Monday showed U.S. consumer confidence unexpectedly

weakened in December as the post-election euphoria fizzled and

concerns about future business conditions emerged.

In currencies, the dollar index held near a two-year

high at 108.14, having climbed more than 2% for the month thus

far.

The euro eased 0.09% to $1.03955, while the yen

languished near a five-month low at 156.99 per dollar.

Japan's Finance Minister Katsunobu Kato on Tuesday

reiterated Tokyo's discomfort over excessive foreign exchange

moves and put speculators on notice that authorities are ready

to act to stabilise a faltering yen.

The strong dollar combined with high bond yields to weigh on

gold, which stood at $2,618.10 an ounce after slipping 1%

last week.

Oil prices edged higher, with Brent crude futures

rising 0.5% to $72.99 a barrel, while U.S. crude gained

0.46% to $69.56 per barrel.