Asian markets experienced a downturn on Friday as investors remained wary of sharp fluctuations in global bond and currency markets, all while keeping a close eye on upcoming U.S. employment data. The decline was compounded by elevated oil prices driven by rising military tensions in the Gulf region, which added to the broader market anxieties.
The MSCI index tracking Asia-Pacific shares outside Japan fell by 0.5%, setting it up for a weekly loss. Japan’s Nikkei index also saw a dip, though it still appeared on track for a weekly gain. Meanwhile, mainland Chinese markets were closed due to a public holiday.
U.S. Treasury yields remained elevated, with the 10-year yield having recently hit its highest point in over 20 years before pulling back slightly. These movements in bond markets have stoked fears regarding borrowing costs, inflation, and the future trajectory of interest rates.
European markets were similarly affected, particularly due to fiscal concerns in France. This was evidenced by a significant widening of the gap between French and German government bond yields, alongside a weakening euro against major currencies like the U.S. dollar, yen, and Swiss franc.
Investors are focused on the latest U.S. nonfarm payrolls data, anticipated to provide insights into the strength of the U.S. economy and potential Federal Reserve interest-rate decisions. Wage growth will also be closely watched due to its implications for inflation.
The U.S. dollar maintained strength, appreciating against major currencies, while the yen weakened despite data indicating an acceleration of underlying inflation in Tokyo for September.
Oil prices stayed high amid reports of increased U.S. military deployments to the Middle East and China’s suspension of certain oil product exports, raising concerns over global fuel supplies and adding pressure on energy prices.