(Bloomberg) — Asian stocks were poised to sell off on Friday following declines on Wall Street that reflected unease over the health of the U.S. economy and sent Treasury bonds higher.
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Stock futures in Japan, Australia and Hong Kong fell, with contracts on Tokyo’s benchmark Nikkei 225 index falling more than 3% on Friday morning. The yen maintained its rally from earlier in the week, keeping pressure on Japanese stocks, which can be vulnerable to currency swings. Both the S&P 500 index and the Nasdaq 100 index fell on Thursday, erasing the previous session’s gains. US stock contracts fell in Asian trading.
Stock declines partly reflected signs of strain in the US economy and the likely timing of Federal Reserve interest rate cuts. Data on Thursday showed U.S. unemployment claims rose to their highest level in nearly a year, while manufacturing slowed. The unrest has led swaps traders to increase the number of expected Fed cuts this year from two to three.
Jobs data, due out Friday, will provide more clarity and is expected to show a slowdown in new roles added to the economy.
“Markets are approaching panic mode as many economic factors converge, supporting a move away from risky assets,” said Jose Torres of Interactive Brokers. “The headwinds for this market are too stormy, especially considering the shares are perfectly priced.”
Profits from some of the largest US companies posed an additional drag on stocks. Intel Corp. said its third-quarter revenue will be disappointing and announced more than 15,000 job cuts. Amazon.com Inc projected profits that fell short of analysts’ estimates as it increased spending to meet demand for artificial intelligence services. Shares of both fell after trading on Thursday.
The rebound in Treasury bonds dragged 10-year yields down five basis points to below 4% for the first time since February. The US two-year yield, which is more sensitive to monetary policy, fell 11 basis points to levels not seen since January.
A dollar strength index rose on Thursday to partially erase losses from the previous session. The yen was little changed, maintaining a rally this week that has pushed the currency to around 149 to the dollar. The pound fell on Thursday after the Bank of England cut rates and signaled further cautious reductions in the future.
In Asia, data expected to be released includes inflation in South Korea, producer prices in Australia and the Singapore PMI for July.
Jobs in USA
Economists expect moderation in job growth in the government’s July employment report, due out Friday. Forecasters predict the unemployment rate will remain stable at 4.1%.
A survey conducted by 22V Research shows that 42% of investors think the market reaction to Friday’s jobs data will be “riskless”, 36% said “insignificant/mixed” and just 22% “risky”.
“The job market has been sending out warning signals in recent months,” said Chris Senyek of Wolfe Research. “History suggests that Powell is walking a very fine line by waiting too long to start cutting rates before it is too late.”
In commodities, oil retreated after its biggest gain in more than nine months, as signs of a slowing US economy countered concerns that conflict in the Middle East could endanger supplies. Elsewhere, gold hovered near record levels.
Main events this week:
Some of the main movements in the markets:
Actions
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S&P 500 futures were down 0.3% at 7:30 a.m. Tokyo time
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Hang Seng futures fell 1.5%
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S&P/ASX 200 futures fell 1.8%
Coins
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The Bloomberg Dollar Spot index was little changed
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The euro was unchanged at $1.0791
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The Japanese yen was little changed at 149.33 per dollar
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The offshore yuan was little changed at 7.2503 to the dollar
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The Australian dollar was little changed at $0.6496
Cryptocurrencies
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Bitcoin rose 1.3% to $65,555.99
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Ether rose 1.2% to $3,205.02
goods
This story was produced with help from Bloomberg Automation.
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