Asia stocks edge up amid Fed lull, oil slips

Asia shares inched ahead while oil fell for a second session on Tuesday, as investors awaited guidance on whether the Federal Reserve will raise US interest rates this year.

MSCI's broadest index of Asia-Pacific shares outside Japan added 0.3 per cent in slow trade. South Korea, Australia and Shanghai all gained.

Japan's Nikkei went the other way and eased 0.2 per cent as the yen held firm on the dollar.

A survey of Japanese manufacturing activity showed signs of steadying in August as output rose for the first time in six months, but had little impact on stocks.

The IHS Markit/Nikkei Japan Flash PMI rose to 49.6 in August from a final 49.3 in July. More flash surveys are due from Europe and the United States later in the day.

The whole world seems to have hushed ahead of comments from Fed Chair Janet Yellen at the central bank's annual meeting in Jackson Hole on Friday. Investors still doubt the stars will align for a hike anytime soon, so a hawkish tone from Yellen would challenge that equanimity.

"Ever so slowly, the market does seem to be reluctantly acknowledging the chorus of senior Fed speakers who have suggested recently that a 2016 rate hike is still quite probable and September is 'live'," wrote analysts at ANZ in a note.

"But in reality, the response has been very muted."

Indeed, US Treasuries actually rallied on Monday, with 10-year yields at 1.54 per cent after falling 4 basis points overnight.

Fed fund futures imply around a 24 per cent chance of an easing in September, rising to around 50 per cent by December.

A quarter-point hike is not fully priced until September 2017.

OIL GIVES GROUND

In commodity markets, oil remained under pressure after shedding 3 per cent on Monday.

Prices retreated from two-month highs on worries about burgeoning Chinese fuel exports, more Iraqi and Nigerian crude shipments and a rising US oil rig count.

Brent crude lost 53 cents to $48.63 a barrel. It hit a two-month high of $51.22 on Friday. US crude futures fell 66 cents to $46.75, after the September contract expired on Monday at $47.05.

On Wall Street, the Dow had ended Monday down 0.12 per cent, while the S&P 500 lost 0.06 per cent and the Nasdaq added 0.12 per cent.

Biotech stocks received a boost from Pfizer's $14 billion acquisition of cancer drug maker Medivation, which jumped nearly 20 per cent.

Of the 479 companies in the S&P 500 that have reported earnings, 71 per cent have topped expectations, according to Thomson Reuters data. Earnings are currently showing a decline of 2.3 per cent for the quarter.

In forex markets, the dollar slipped a touch to 94.466 against a basket of currencies. The index fell about 1.3 per cent last week on what traders perceived as mixed signals from Fed officials.

The dollar drifted as low as 100.03 yen in early trade but found enough support to clamber back to 100.27. The euro was a shade firmer at $1.1332.

The New Zealand dollar blipped higher after the country's central bank forecast another 35 basis points in possible rate cuts, less than many investors had wagered on.

The kiwi dollar rose around a third of a cent to $0.7310 in reaction.