Asian shares extended the global fall this Friday (21), after the long-awaited US employment data did not provide clarity on the short-term path of interest rates.
Investors began to get rid of risky assets again, even after the .
as concerns about inflated technology stock prices return, resulting in the Nasdaq’s biggest daily swing since April 9, when U.S. President Donald Trump’s “Liberation Day” tariffs spooked markets.
Data showed that the US economy created many more jobs than expected in September, but the rising unemployment rate and downward revisions from previous months created an ambiguous picture for the Federal Reserve as it weighs whether or not to cut interest rates next month.
US Treasury yields fell, with futures contracts indicating a 40% probability of a US interest rate cut in December, up from 30% the previous day.
However, with the next employment data not due until after the Federal Reserve meeting, investors remain skeptical about monetary easing next month.
On Friday, MSCI’s index of Asia-Pacific shares excluding Japan tumbled 1.8%, taking its weekly loss to 3%, the biggest since early April.
Japan’s Nikkei fell 1.8% and was down 2.8% for the week.
Stocks in Taiwan fell 2.7%, while the South Korean market (.KS11) plunged more than 3%.
In China, assets also suffered sharp falls, with the CSI300 index falling 1.1% and Hong Kong’s Hang Seng index falling 1.7%.
“Markets had plenty of reason for optimism, and initially Nvidia’s excellent quarterly results buoyed Wall Street. U.S. employment data was also probably as good as could have been expected,” said Kyle Rodda, senior analyst at Capital.com.
“However, the momentum was simply not enough to sustain the rally, and the overcoming of two critical risk events – both with positive outcomes, by the way – was not enough to dispel the pessimism that currently dominates the markets,” said Rodda
Fed cautious
Federal Reserve officials struck a cautious tone on inflation overnight, with some expressing emerging concerns about financial market stability, including the potential for a sharp drop in asset prices, as they debate when and even whether to cut interest rates further.
Cleveland Fed President Beth Hammack warned that cutting rates further at this time carries a wide range of risks for the economy. Federal Reserve Governor Lisa Cook sees the risk of sharp declines in asset prices.
In foreign exchange markets, the dollar appreciated against risk-sensitive commodity currencies, reaching a three-month high in the Australian dollar and a new seven-month high in the New Zealand dollar, although the two Oceanian currencies stabilized somewhat on Friday.
The yen rose briefly after Japanese Finance Minister Satsuki Katayama said intervention was a possibility to deal with excessively volatile and speculative movements, in an escalation of statements from Tokyo to stem the currency’s slide.
The yen held steady at 157.40 per dollar after falling to a new 10-month low of 157.9 overnight, pressured by the prospects of a massive economic stimulus package from the new Japanese government, worth more than 20 trillion yen, to be announced later on Friday.
Kazuo Ueda, governor of the Bank of Japan, said a weak yen could affect underlying inflation.
Earlier, data showed that consumer prices in Japan rose 3% in October, keeping alive expectations of an interest rate hike soon.
US Treasuries steadied after last night’s rally. Two-year Treasury yields were steady at 3.554% after a 4 basis point drop overnight, while the 10-year bond yield was little changed at 4.098% after a 3 basis point drop during US trading.
Oil prices extended last night’s slide as the US government pressured Ukraine to accept a peace deal with Russia.
US West Texas Intermediate crude fell 1% to $58.38 and is down 2.8% for the week.
Spot gold prices fell 0.2% to $4,069 per ounce after little change overnight.
