Asian equities traded cautiously on Friday as investors awaited US jobs data that could influence the Federal Reserve’s interest-rate decision next month, while rising oil prices kept Middle East risks firmly in focus.
MSCI’s broadest index of Asia-Pacific shares outside Japan was flat and was down 0.4% for the week. Japan’s Nikkei slipped 0.9% but remained on track for a 1.2% weekly gain, while South Korea’s KOSPI fell 0.5% and was heading for a seventh consecutive weekly decline, down 5% for the week.
China’s CSI 300, meanwhile, gained 0.2%.
Markets are focused on the US non-farm payrolls report due later on Friday, with forecasts pointing to an increase of 80,000 jobs in July following a 57,000 gain in June. The unemployment rate is expected to remain at 4.2%.
The data could shape expectations for the Federal Reserve’s next policy move, with markets currently split over the possibility of a rate hike next month.
“With yields and inflation still the key risks for stocks, we expect Friday’s NFP to trade as a ‘good news is bad news’ print,” said JPMorgan chief US economist Michael Feroli.
He said a stronger jobs reading could reinforce expectations for interest rates to remain higher for longer, putting upward pressure on yields. Conversely, softer payrolls could support equities by easing yields and shifting policy expectations towards a more dovish path.
Nasdaq futures were flat while S&P 500 futures slipped 0.1%. European equities were also set for a weaker opening, with pan-region stock futures down 0.2%.
Oil Extends Gains On Middle East Risks
Oil prices continued to rise as concerns over the reopening of the Strait of Hormuz added to renewed Middle East tensions.
Brent crude futures gained 1% to US$83.38 a barrel, extending a 3.8% jump overnight. Despite the latest gains, Brent remained on track for a 7.5% weekly decline and was well below its recent peak of US$102 a barrel two weeks ago.
The latest rise came after Yemen’s Houthis attacked Saudi Arabia, with Riyadh warning that coordinated attacks by the Houthis and Iran-backed Iraqi militias were imminent.
Iran is also reviewing a preliminary bill that would bar US, Israeli and other vessels deemed “hostile” from transiting the Strait of Hormuz. The proposed legislation could impose fines of up to 20% of a ship’s cargo value for violations.
The Strait of Hormuz remains a key energy chokepoint, making any restrictions on shipping a potential source of further volatility in oil markets.
Higher oil prices pushed Treasury yields higher, with the two-year note yield holding at 4.2496% in Asian trading after rising seven basis points overnight. The 10-year yield steadied at 4.6757% after gaining five basis points.
The US dollar was broadly steady in Asia after rising overnight. Against the Japanese yen, the dollar traded at 158.51 yen after gaining 0.4% overnight and moving above its 200-day average of around 158 yen.
The US jobs report could determine the yen’s next move following Japan and the US’s intervention in currency markets last week.
Gold edged up 0.1% to US$4,243 an ounce while silver rose 0.5% to US$61.78 an ounce.
Reuters
