Investors cautious before vote on Trump's tax bill

The bond vigilantes are stalking global debt markets, keeping the dollar and stocks subdued as well, before a crucial vote in the United States on President Donald Trump's "big beautiful" tax bill.

Caution dominated in Europe on Thursday after a lacklustre US 20-year bond sale on Wednesday reinforced a "Sell America" narrative already nagging on investors' minds after Moody's last week cut its triple-A credit rating for the United States.

Germany's long-term bond yields hit their highest in two months as global yield curves steepened.

Britain's government borrowed more than expected in April, figures showed, while euro zone business activity unexpectedly slipped back into contraction territory.

It left stock markets in London, Paris, Milan and Frankfurt down more than 0.5 per cent.

Safe-haven gold rose to a two-week peak while bitcoin jumped to a record high, partly as investors sought out alternatives to US assets.

The non-partisan Committee for a Responsible Federal Budget estimates the US bill, which will extend Trump's signature 2017 tax cuts as well boost military and other spending, will increase the US debt pile by $US3.8 trillion ($A5.9 trillion) over the next decade.

UBS economist Paul Donovan said while the final details were still to be seen, "the broad impact is to push the US further along a rising debt path. Bond investors are less than happy."

The yields on 30-year Treasury bonds - a proxy for super long-term US government borrowing costs - reached 5.108 per cent, its highest since October 2023 and the 20-year yield hit 5.126 per cent, its highest since November that year.

The bond market in Japan has also been in focus given it has the highest debt-to-GDP ratio of any major economy.

The 30-year JGB yield hovered at 3.155 per cent, not far from the record high of 3.185 per cent hit in the previous session.

Stocks in Asia also fell after Wall Street tumbled following the tepid debt auction.

MSCI's broadest index of Asia-Pacific shares outside Japan ended 0.6 per cent lower, while Japan's Nikkei fell 0.8 per cent on a stronger yen.

Oil prices fell more than one per cent following a report that OPEC+ is discussing a production increase for July, stoking concerns that any potential jump in global supply will exceed demand growth.

Brent futures fell $US1.05, or 1.62 per cent, to $US63.86 a barrel in Europe, while US West Texas Intermediate crude dropped 97 cents, or 1.58 per cent, to $US60.60.

Modest progress to date on trade deals has also kept investors jittery.

Attention will also be on a Group of Seven meeting in Canada, where finance ministers put a positive spin on discussions to try to reach an agreement on a joint communique largely covering non-tariff issues.

Investors have also been scouring for any hints that currency markets could be part of trade negotiations.

However, Thai and Japanese officials said currency markets were not part of their discussions.