Asian stocks hit a two-year low, U.S. yields fell, and the Swiss franc and yen rose after weak U.S. factory data.
Japan’s Nikkei faces its worst day in over four years, following Wall Street’s slide, a rising yen, and uncertain interest rates.
The gloomy mood in Asia, triggered by Thursday’s U.S. manufacturing dip, is likely to extend to Europe, with EUROSTOXX 50 futures down 0.8%.
FTSE futures were stable, but U.S. stock futures fell further, with Nasdaq down 1.35% and S&P 500 down 0.76%.
MSCI’s Asia-Pacific index outside Japan fell 2.54%, following Wall Street’s sharp selloff, marking its worst day since June 2022.
Following the weak U.S. ISM report, broad market sell-offs emerged as investors feared an economic downturn and slow Fed rate cuts.
Geopolitical tensions impacted sentiment, as the Israeli military reported Hamas’ military chief, Mohammed Deif, was killed in Gaza, following Ismail Haniyeh’s death.
“At the moment … if there’s any signs of weakness, then the market will grasp them. It’s looking for bad news,” said Rob Carnell, ING’s regional head of research for Asia-Pacific.
In Asia, Japan’s Nikkei fell over 5%, dropping below 37,000 for the first time since April.
It was last down 4.9%, on track for the worst daily decline since March 2020.
The Nikkei’s drop follows sharp yen gains, as the BOJ raised interest rates to a 15-year high and cut bond buying.
Hong Kong’s Hang Seng Index fell 2.13%, while Chinese blue chips lost 0.66%.
Focus on U.S. Non-Farm Payrolls Impacts Market Trends and Fed Rate Predictions
Attention shifts to Friday’s non-farm payrolls report for insights into the U.S. labor market, influencing expectations of future Fed rate cuts.
Futures indicate a 29% possibility of a 50-basis-point decrease from the Fed in September.
“Clearly, all the focus now falls on U.S. non-farm payrolls in the session ahead and Asia-based equity traders will be highly cognizant that they will have to hold positions through the U.S. session with the threat of gapping risk on the Monday open,” said Chris Weston, head of research at Pepperstone.
“With the market firmly moving to a mantra that bad news is bad news for risky assets and sentiment, where swaps are pricing an element of more emergency cuts, poor U.S. job numbers will not be digested well at all.”
In currencies, the yen rose 0.12% to 149.18 per dollar, lingering near a four-month high.
It aimed for a 3% weekly rise, with Japanese currency gains boosted by safety flows on Friday.
Thus, the Swiss franc gained strength from the risk-off mood, reaching its highest since early February at 0.87145 per dollar.
Sterling fell 0.05% to $1.2728, following the Bank of England’s interest rate cut from a 16-year high on Thursday.
Reflecting investor concerns about a U.S. slowdown, the 10-year Treasury yield dropped to 3.9440% in early Asia trading.
Bond yields move inversely to prices.
The two-year yield, reflecting near-term rates, fell to 4.1090%—its lowest since May 2023—before last at 4.1409%.
Oil prices edged higher on Friday, but were poised for a fourth weekly decline as weak global demand overshadowed supply fears.
Brent was last up 0.6% to $79.99 per barrel, while US crude gained 0.63% to $76.79 per barrel.
Spot gold rose 0.55% to $2,458.99 per ounce.
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