Asian stocks hobbled by fading expectations for aggressive Fed rate cut

Asian stocks struggled to rebound on Tuesday as investors came to terms with sharply reduced expectations the Federal Reserve will deliver a large interest rate cut at the end of July.

Those views were bolstered after solid gains in U.S. jobs for June and pushed down Wall Street for the second straight day.

MSCI's broadest index of Asia-Pacific shares outside Japan ticked up 0.1 percent in early trade, after falling 0.6 percent the previous day. Japan's Nikkei rose 0.5 percent thanks in part to the yen's retreat against the dollar.

On Wall Street, the S&P 500 lost 0.48 percent while the Nasdaq Composite dropped 0.78 percent, led by fall in Apple Inc.

Money market futures are still fully pricing in a 25 basis point cut at the Fed's next policy meeting on July 30-31, but have almost priced out a larger 50 basis point reduction.

"The headline payrolls figures was pretty strong but wages were tepid, so on the whole a 25 basis-point cut would be justified as an pre-emptive move and I think the current market pricing is fair," said Naoya Oshikubo, senior economist at Sumitomo Mitsui Trust Asset Management.

Investors' focus is shifting to Fed Chairman Jerome Powell's testimony before Congress later in the week for clues on monetary policy.