Asian stock markets faced declines on Friday as investors remained cautious amid heightened volatility in global bond and currency markets ahead of crucial U.S. employment data. The situation was compounded by rising military tensions in the Gulf, which have driven up oil prices and added to the uncertainty.
An index tracking Asia-Pacific shares outside Japan fell by 0.5%, setting the stage for a weekly loss. Japan’s Nikkei also experienced a dip, though it was still on track for a weekly gain. Meanwhile, mainland Chinese markets were closed due to a public holiday.
The bond markets have been a particular focus, with U.S. Treasury yields staying elevated after the benchmark 10-year yield reached its highest level in over two decades before pulling back. These sharp movements have heightened concerns about borrowing costs, inflation, and potential interest rate changes. In Europe, fiscal concerns in France have led to a widening gap between French and German government bond yields, and the euro has weakened against the U.S. dollar, yen, and Swiss franc.
Investors are keenly watching the upcoming U.S. nonfarm payrolls data for insights into the health of the U.S. economy and potential future actions by the Federal Reserve regarding interest rates. Wage growth in particular is being scrutinized for its potential impact on inflation.
In the currency markets, the U.S. dollar remained strong, maintaining gains against major currencies, while the yen weakened despite data indicating that underlying inflation in Tokyo accelerated in September.
Oil prices continued to be a source of concern as reports of increased U.S. military deployments to the Middle East and China’s suspension of some oil product exports fueled worries about global fuel supplies and further upward pressure on energy prices.