Asian markets saw a decline on Friday as investors remained cautious amid volatility in global bond and currency markets, with anticipation building around key U.S. employment data. The Asia-Pacific index, excluding Japan, fell by 0.5%, setting the stage for a weekly downturn. Japan’s Nikkei also slipped, though it is still on track for a weekly gain. Meanwhile, mainland Chinese markets were closed for a public holiday.
The bond market experienced sharp movements, with U.S. Treasury yields remaining elevated after the 10-year yield recently hit its highest level in over two decades. This volatility has sparked concerns regarding borrowing costs, inflation, and the future of interest rates. In Europe, fiscal worries in France have led to a notable widening of the gap between French and German government bond yields. Concurrently, the euro weakened against major currencies, including the U.S. dollar, yen, and Swiss franc.
Investors are keeping a close watch on the upcoming U.S. nonfarm payrolls report, seeking insights into the U.S. economy’s strength and potential shifts in the Federal Reserve’s interest rate policies. Wage growth, in particular, is under scrutiny due to its possible impact on inflation.
The U.S. dollar maintained its strength, gaining against major currencies. In contrast, the yen weakened, despite data indicating accelerating underlying inflation in Tokyo for September.
Elevated oil prices added to market concerns, driven by reports of increased U.S. military deployments to the Middle East and China’s decision to halt some oil product exports. These developments have intensified worries about global fuel supply disruptions and potential pressure on energy prices.