Asian shares held their breath on Friday for U.S. jobs data that could prove pivotal for next month's interest-rate decision by the Federal Reserve, while rising oil prices served as a reminder that Middle East tensions remain far from resolved.
MSCI's broadest index of Asia-Pacific shares outside Japan (.MISX00000PUS) held flat and was down 0.4% for the week. Japan's Nikkei (.N225) dropped 0.9% although it was set for a weekly rise of 1.2%.
South Korea's KOSPI (.KS11) slipped 0.5% and was down 5.0% for the week for a seventh straight week of declines. The index had doubled in the first half of the year, swept up by the blistering demand for AI-linked chip stocks. China's CSI 300 (.CSI300) rose 0.2%.
After bouts of volatility sparked by concerns over the durability of the AI-driven rally, investors are now squarely focused on the U.S. payrolls report due later in the day, which could prove crucial for the interest-rate outlook. Forecasts are centred on a rise of 80,000 jobs for July after a 57,000 gain in June, with the unemployment rate forecast to hold steady at 4.2%.
The stakes are high as markets cannot seem to make up their mind about how the Federal Reserve might move next month, with a rate hike seen as a coin toss.
"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 Michael Feroli, chief U.S. economist at JPMorgan, adding that a strong jobs number would reinforce higher-for-longer pricing and put upward pressure on rates.
Conversely, equities may respond positively to a soft payrolls report as yields ease and policy expectations shift toward a dovish path, added Feroli.
Nasdaq futures were flat while S&P 500 futures slipped 0.1%. European bourses are set for a lower open, with pan-region stock futures down 0.2%.
OIL CLIMBS AGAIN
Tensions in the Middle East flared up again after Yemen's Houthis attacked Saudi Arabia, a major oil supplier. Riyadh has warned coordinated attacks by the Houthis and Iran-backed Iraqi militias were imminent.
Brent crude futures gained 1% to $83.38 a barrel, after jumping 3.8% overnight. They were, however, still set for a weekly loss of 7.5% and remained well off their recent peak of $102 a barrel two weeks ago.
Iran is reviewing a preliminary bill that would bar U.S., Israeli and other "hostile" vessels from transiting the Strait of Hormuz. The draft bill would impose fines of up to 20% of a ship's cargo value for violations of the proposed restrictions.
Higher oil prices lifted Treasury yields. The 2-year note yield held at 4.2496% in Asia, after rising 7 basis points overnight, while the ten-year yield steadied at 4.6757%, having gained 5 bps overnight.
The dollar was steady in Asia on Friday after bouncing overnight.
Against the Japanese yen , the dollar traded at 158.51 yen, after rising 0.4% overnight to break above the 200-day average of around 158. The U.S. jobs report could decide the next moves in the yen after last week's historic currency market intervention from Japan and the U.S. sparked a sharp rally.
Spot gold rose 0.1% to $4,243 an ounce, while spot silver rose 0.5% to $61.78 an ounce.
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