Asian stocks eased on Tuesday in cautious end-of-year trading that has seen investors scale back bets of deep U.S. rate cuts in 2025 and brace for the incoming Trump administration, with the dollar standing tall against most other currencies.

Volumes were light with a holiday for the New Year looming and Japan on holiday for the rest of the week, with the Santa-rally losing some steam as elevated Treasury yields weigh on high equity valuations and boost the greenback.

MSCI's broadest index of Asia-Pacific shares outside Japan nudged down 0.2% but was set for an 8% gain in 2024, its second straight year in the black.

China's blue-chip CSI300 index was flat while Hong Kong's Hang Seng index (.HSI), opens new tab was 0.3% higher in early trading.

Data earlier in the day showed China's manufacturing activity expanded for a third straight month in December but at a slower pace, suggesting a blitz of fresh stimulus is helping to support the world's second-largest economy.

On Wall Street, all three major U.S. indexes closed on Monday with sharp losses in a broad selloff at the end of a strong year mainly due to end-of-year tax positioning, valuations worries and uncertainties about 2025.

Kyle Rodda, senior financial market analyst at Capital.com., said the principle issue for the markets right now is the risk of a "re-rating in bond markets, due to persistent inflation in the U.S. and the impacts of Trump tax-cuts and tariffs."

Despite the year-end weakness, U.S. stocks have surged this year, with the Nasdaq on track for about a 30% annual gain and the S&P 500 headed for more than a 24% rise.

The gloomy year-end mood is set to continue in Europe, with Eurostoxx 50 futures down 0.67%, German DAX futures down 0.62% and FTSE futures 0.08% lower.

Investor focus next year will be on the Federal Reserve's rate path after the central bank earlier this month projected just two rate cuts, down from four in September due to stubbornly high inflation.

Source: Reuters