Asia stocks rise as Nikkei sets record, dollar drops

• Japanese stocks, yen extend gains after Takaichi's election victory
• S&P 500 e-mini futures show signs of exhaustion after rally
• White House primes markets for lower jobs growth

By Gregor Stuart Hunter

SINGAPORE, Feb 10 (Reuters) - Asian stocks advanced for a second day in early trading on Tuesday, led by an extended rally in Tokyo's benchmark after Japanese Prime Minister Sanae Takaichi's decisive election victory over the weekend.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.7%, while the Nikkei 225 .N225 jumped 2.8%, rising for a third consecutive day to a fresh peak. The yen also strengthened for a second day.

U.S. equity futures cooled after a two-day rally, with S&P 500 e-mini futures EScv1 down 0.1%, partially retracing gains on Wall Street overnight. On Monday, the S&P 500 .SPX rose 0.5% and the Nasdaq Composite .IXIC gained 0.9% as technology stocks found their footing following last week's AI-sparked selloff.

"Overall, we actually are quite positive on the economic situation, although we see maybe some cracks," said Kees Verbaas, Robeco’s global head of fundamental equity.

"The investment programmes of the large companies are increasing rather than decreasing... which typically is good for economic activity," he added. "A lot of the AI supply chain is only possible thanks to emerging markets."

With several critical U.S. economic reports due for release this week including delayed payrolls data, White House economic adviser Kevin Hassett said on Monday job gains could be lower in the coming months as the Trump administration's immigration policies slow labour growth and new AI tools boost productivity.

Against the yen JPY=, the U.S. dollar was last down 0.4% at 155.265 yen.

The U.S. dollar index =USD, which measures the greenback's strength against a basket of six currencies, was down 0.2%, wallowing near its lowest levels of the month at 96.799.

The index logged its biggest one-day drop in two weeks on Monday, following a Bloomberg News report that Chinese regulators advised financial institutions to curb holdings of U.S. Treasury bonds due to concern over concentration risk and market volatility.

Treasury Secretary Scott Bessent said on Monday that senior U.S. Treasury staff visited China last week "to strengthen channels of communication" between Washington and Beijing.

Against the offshore yuan CNH=, the dollar was last down 0.1% at 6.9058 yuan.

"Elevating the renminbi’s global role is moving up the policy agenda," analysts from Alpine Macro wrote in a research note. "Beijing’s main goal is not to challenge the dollar’s dominance but to reduce vulnerability to it."

The yield on the U.S. 10-year Treasury bond was last flat at 4.184%.

Market pricing continues to indicate that the Federal Reserve will remain on hold until June. Fed funds futures are pricing an implied 17.7% probability of a 25-basis-point rate cut at the U.S. central bank's next two-day meeting on March 18, compared with an 18.4% chance on Friday, according to the CME Group's FedWatch tool.

Indonesian markets .JSKE remained composed at the start of trading in Jakarta, rising 1% and largely unswayed by FTSE Russell's decision to postpone a scheduled index review. Last month, larger rival MSCI MSCI.N warned the country risked a downgrade to frontier status over data transparency issues.

In commodities markets, Brent crude LCOc1 was last down 0.3% at $68.81.

Gold XAU= fell 0.7% at $5,030.02 per ounce, while silver XAG= lost 2% at $81.74 per ounce.

Bitcoin BTC= was last down 1.5% at $69,337.26, while ether ETH= tumbled 2.9% to $2,060.76.