While investors prepared for more aggressive rate hikes from the Federal Reserve, Asian markets were divided, and the dollar held strong on Friday before crucial U.S. employment data.
Meanwhile, commodities fell overnight due to further China lockdowns. As mounting expectations of aggressive global rate rises hurt riskier assets, MSCI’s broadest index of Asia-Pacific equities outside of Japan held essentially steady in early Asian trade but was on track to post its worst weekly performance in seven. China’s blue chips and Japan’s Nikkei remained mostly unchanged, while South Korea gained 0.5% and Hong Kong’s Hang Seng index decreased by 0.2%.
All eyes are currently on the U.S. August nonfarm payroll data that is coming on Friday. Analysts predict that while unemployment remained at 3.5%, 285,000 jobs were gained last month. Investors could not appreciate a good result if it encourages the Fed to keep raising interest rates aggressively since this might 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. The dollar index, which compares the value of the dollar to a basket of six important currencies, was almost at a 20-year high on Friday at 109.55. After reaching a 24-year top against the rate-sensitive currency in the previous session, it marginally weakened versus the Japanese yen. The dollar increased by 0.7%. Oil prices fell 3% overnight before bouncing back somewhat on Friday, but they were still headed for their biggest weekly decline in four weeks due to concerns that COVID-19 restrictions in China and a sluggish global economy could hurt demand.
The price of Brent oil futures increased by 1.3% to $93.56 a barrel on Friday, while the price of U.S. West Texas Intermediate (WTI) crude futures also increased. The Nasdaq Composite ended the day down 0.3%, while the U.S. S&P 500 index rose 0.3% overnight. Fears of a recession are growing in Europe as a poll released on Thursday revealed that industrial output in the eurozone 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 possibly positive payroll statistics, Treasury rates modestly decreased. Benchmark two-year note yields were hovering around 3.5117%, just shy of their 15-year high of 3.5510%, while 10-year bond yields were at 3.2609%, up from their previous closing of 3.2650%.
