(BSS/AFP) - Asian markets were mixed Thursday following steep losses on Wall Street as a spike in US Treasury yields led investors to scale back their expectations on interest rate cuts.

With the US presidential election still seen as a coin toss less than two weeks out, there was plenty of uncertainty on trading floors, though observers said dealers were eyeing a win for Donald Trump and policies that could stoke inflation again.

That, along with a strong run of economic data and remarks from Federal Reserve officials backing a cautious approach to easing monetary policy, has seen expectations for rate cuts whittled back.

Traders had last month been confident the central bank would follow up last month`s bumper 50-basis-point cut with another at its November meeting and a smaller one in December.

But those expectations have diminished as Treasury yields push higher to 4.24 percent compared with 3.73 percent in September.

Observers said there is concern that a win for Trump over Democratic rival Kamala Harris could see him introduce tax cuts, ramp up trade tariffs and push for more deregulation.

This has fuelled the so-called Trump trade in which investors jockey for positions to prepare for such an eventuality.

Sentiment has been "weighed down by the move up in yields and push back on Fed rate cut expectations", said National Australia Bank`s Rodrigo Catril.

"Solid economic momentum as well as Fed messaging emphasising a gradual and deliberate approach to further policy easing is making the market nervous," he added.

"Then once you add the upcoming US election alongside its associated uncertainty (higher or lower taxes?, more or less regulation?, new trade war?), taking some chips off the table makes sense."

All three main indexes on Wall Street finished well down, with the Nasdaq losing more than one percent.

Hong Kong led the retreat in Asia by similarly shedding more than one percent, while Shanghai, Seoul, Taipei and Manila were also lower.

Tokyo, Sydney, Seoul and Wellington rose.

The drop in rate cut expectations has pushed the dollar up against its peers, bringing it to a near three-month high against the yen and a two-and-a-half-month high against sterling.

Gold extended Wednesday`s drop from a record high as bonds offer better returns than the precious metal, which does not provide interest.

And oil prices rose more than one percent, clawing back the previous day`s drop as dealers try to assess the demand outlook and the crisis in the Middle East amid fears about Israel`s plans to retaliate against Iran for this month`s missile attack.

- Key figures around 0230 GMT -

Tokyo - Nikkei 225: UP 0.1 percent at 38,154.25 (break)

Hong Kong - Hang Seng Index: DOWN 1.4 percent at 20,476.07

Shanghai - Composite: DOWN 0.7 percent at 3,278.76

Euro/dollar: DOWN at $1.0782 from $1.0787 on Wednesday

Pound/dollar: DOWN at $1.2921 from $1.2929

Dollar/yen: UP at 152.66 yen from 152.65 yen

Euro/pound: UP at 83.45 pence from 83.41 pence

West Texas Intermediate: DOWN 1.2 percent at $71.65 per barrel

Brent North Sea Crude: DOWN 1.1 percent at $75.79 per barrel

New York - Dow: DOWN 1.0 percent at 42,514.95 (close)

London - FTSE 100: DOWN 0.6 percent at 8,258.64 (close)