By Ankur Banerjee
SINGAPORE (Reuters) -Asian shares were subdued on Thursday, with Japanese stocks sliding to their lowest in three weeks as investors sought safety, pushing the yen to a one-month high while U.S. economic worries boosted prospects for the Federal Reserve to cut rates.
In a data-packed week, investors are scouring for clues to the health of the U.S. economy and the labour market, with markets on edge from Tuesday's weak manufacturing figures and Wednesday's mixed labour data.
Amid the fragile sentiment, Japan's benchmark Nikkei slid more than 1% to its lowest in three weeks, while stocks in tech-heavy Taiwan and South Korean stood slightly higher on the day, giving up earlier gains.
The MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.25%, subdued after having tumbled nearly 3% during a three-day losing streak. The index had risen more than 0.6% but gave up those gains.
Futures indicated European bourses would open in the red, with Eurostoxx 50 futures down 0.25%, German DAX futures 0.3% lower and FTSE futures down 0.25%.
"September has historically been a challenging month for risk assets," said Daniel Tan, a Singapore-based portfolio manager at Grasshopper Asset Management.
"It is not unusual for global portfolio managers to take some profit off the table, given strong performance in July and August."
On Thursday, investors will focus attention on a reading on the U.S. services industry and jobless claims data, but the week's key concern will be Friday's hotly anticipated August report for nonfarm payrolls.
The report is expected to provide the clearest clues on where the economy is headed, and whether the Fed will cut rates by a quarter or half a percentage point this month.
Markets are now pricing in a 44% chance of a cut of 50 basis points at the bank's Sept. 17-18 meeting, up from 38% a day earlier, the 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 on Wednesday showed U.S. job openings dropped to a 3-1/2-year low in July, suggesting the labour market was losing steam.
San Francisco Fed President Mary Daly said the Fed needed to cut interest rates to keep the labour market healthy, but it is now down to incoming economic data to determine how much.
Analysts expect sentiment to remain fragile and growth names to struggle.
"Near-term I think there will still be further downside in the U.S. tech names, due to sentiment and technical moves," said Francis Tan, chief strategist for Asia at Indosuez Wealth Management.
"We encourage moves into the value sectors... looking more at the more - you can call it boring names - telcos, healthcare names and some utility and infrastructure related sectors."
In the currency market, the dollar stayed on the defensive, as odds of larger rate cuts rose. [FRX/]
The Japanese yen was one of the biggest beneficiaries of investors' flight from risky assets.
It last stood at 143.46 per dollar, off a one-month high of 143.20 earlier in the session. It is up nearly 2% for the week.
Treasury yields were calm in Asian hours on Thursday after diving in the previous session. Benchmark 10-year note yields were at 3.765%, while two-year note yields were little changed at 3.764%. [US/]
In commodities, Brent crude futures rose 0.37% to $72.97 after dropping 1.42% in the previous session. U.S. West Texas Intermediate crude futures were up 0.38% at $69.46 after sliding 1.62% on Wednesday.