Ahead of the U.S. payrolls announcement, Asian stocks remain quiet.
Australia (Reuters) - While investors braced for more aggressive rate hikes from the Federal Reserve and the dollar held strong ahead of a key U.S. jobs report, Asian shares struggled to find direction on Friday. Meanwhile, fresh lockdowns in China added to worries about global growth.
The European markets, though, appear to be doing better, with the pan-regional Euro Stoxx 50 futures recently up 1.2%, the German DAX futures up 1.3%, and the FTSE futures up 0.75%.
The U.S. August nonfarm payroll report, which is due on Friday, has everyone's attention.
Analysts predict that while unemployment stayed at 3.5% last month, 300,000 jobs were added. Investors could not like a strong result if it encourages the Fed to keep raising interest rates aggressively, as this could increase the value of the dollar and trigger a sell-off of bonds.
The possibility that the Fed would raise interest rates by 75 basis points at its September policy meeting has increased from 69% to as high as 75%, according to futures markets.
As riskier assets were hurt by increased expectations of hawkish global rate hikes, MSCI's broadest index of Asia-Pacific equities outside of Japan lost 0.5% on Friday, setting the stage for its worst weekly performance since mid-June with a decline of 3.6%.
The Hang Seng index in Hong Kong sank 1.0%, the Nikkei in Japan down 0.1%, the bluechip index in China fell 0.5%, and the South Korean market was basically unchanged.
Tobin Gorey, director of agriculture strategy at the Commonwealth Bank, stated in a note that markets "generally continue to absorb that the message of central banks' 'whatever it takes' to lower inflation means much slower global economic growth." And under that scenario, China's deteriorating economy is a specific amplifying influence.
As more Chinese cities attempted to contain recurrent COVID-19 outbreaks, the 21.2 million-person metropolis of Chengdu in the southwest of the country announced a lockdown of its citizens on Thursday. The technology hub of Shenzhen also unveiled new social distancing guidelines.
What Nomura analysts stated is increasingly worrisome is that COVID-19 hotspots in China are moving from rural areas and cities to provinces that are considerably more important to China's national economy.
After the (leadership) turnover is complete in March 2023, "we continue the view that China will keep its zero-COVID policy, although we now estimate a slower pace of easing after March 2023," Nomura said.
Oil prices fell 3% overnight before bouncing back somewhat on Friday, but they were still on course to record significant weekly losses because to concerns that COVID-19 restrictions in China and sluggish global growth could hurt demand.
Friday saw a 2% increase in Brent crude futures to $94.15 per barrel and a 2% increase in U.S. West Texas Intermediate (WTI) crude futures to $88.34 per barrel.
The dollar index, which compares the value of the dollar to a basket of six other currencies, was trading close to a 20-year high on Friday at 109.49. In addition, it reached a new 24-year high versus the rate-vulnerable Japanese yen and resumed trading over 140 yen to the dollar.
U.S. stocks managed moderate gains overnight, with the S&P 500 index rising 0.3%. The Nasdaq Composite ended with a 0.3% loss.
Fears of a recession are growing in Europe as a survey released on Thursday revealed that manufacturing output in the euro zone fell once more last month as consumers reined in their spending due to the stress brought on by the increase in the cost of living.
Ahead of potentially positive payrolls statistics, Treasury yields modestly decreased.
While the yield on benchmark 10-year bonds was 3.2556%, down from its previous closing of 3.2650%, the yield on benchmark two-year notes decreased by 2 basis points to 3.5046%.
Gold increased little. The going rate for spot gold was $1699.19 per ounce.