Asian stocks retreated on Friday as oil prices headed for their biggest weekly gain in more than a year, while rising tensions in the Middle East kept markets nervous ahead of a U.S. jobs report later in the day.
US President Joe Biden said on Thursday that the United States is discussing attacks on Iran’s oil facilities in retaliation for Tehran’s missile attack on Israel, while Israel’s military hit Beirut with new airstrikes in its battle against the Lebanese armed group Hezbollah.
His comments sparked a spike in oil prices, which had already been rising this week following the widening conflict in the Middle East.
Brent crude futures fell 0.04 percent to $77.59 a barrel on Friday, but were on track for a weekly gain of about 7.8 percent, the biggest since February 2023.
U.S. West Texas Intermediate (WTI) crude futures stabilized at $73.71 per barrel and were on track to advance 8.1 percent for the week, the most since March 2023.
“I think we’re probably not far away from getting an Israeli response. The concern, obviously, is that President Biden confirmed that Iranian oil facilities were discussed as a potential target,” said Tony Sycamore, market analyst at IG.
“If we woke up on Saturday or Sunday morning and found out there had been a response, that wouldn’t surprise me at all. So you have to operate very cautiously before that. We know it’s coming, it’s just creating uncertainty because we don’t “We don’t know what the timing is and of course we don’t know what they have decided in terms of objectives.”
The air of caution, in turn, left most stocks in the red on Friday.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 0.32 percent and was on track to end the week little changed.
Australian shares (.AXJO) fell 1 percent, while equity futures extended their declines from the previous session.
S&P 500 futures and Nasdaq futures were down 0.03 percent each, while EUROSTOXX 50 futures were flat.
Japan Nikkei (.N225), also reversed early gains for the last trade with a decline of 0.08 percent. It was headed for a weekly loss of more than 3 percent.
He Nikkei has had some choppy sessions this week as investors weighed rising geopolitical tensions against the outlook for domestic rates.
Japanese officials, including Prime Minister Shigeru Ishiba, said this week that economic conditions in the country were not ripe for further rate hikes by the Bank of Japan (BOJ), and that the central bank should be cautious when it comes to to tighten the policy even further.
The comments caused the yen to weaken beyond the 147 per dollar level, although it traded higher on Friday and was last at 146.60 per dollar.
Still, the Japanese currency was headed for a weekly drop of about 3 percent, its steepest drop since 2016.
In good news, U.S. dockworkers and port operators have reached a tentative agreement that will immediately end a crippling three-day strike that has paralyzed shipping on the U.S. East Coast and Gulf Coast, they said. both sides on Thursday.
Economic resilience
Attention was also focused on the key US nonfarm payrolls report due later on Friday, which would provide more clues on the Federal Reserve’s rate outlook.
The world’s largest economy is expected to have added 140,000 jobs last month, slightly below the gain of 142,000 in August.
Before the release, the dollar was holding near a six-week high against a basket of currencies and was last trading at 101.92.
A slew of data released this week has pointed to a U.S. economy still in strong shape, after the country’s service sector activity jumped to a one-and-a-half-year high in September amid strong growth in new orders. while a separate report from the Labor Department on Thursday showed the labor market was moving slowly at the end of the third quarter.
That prompted traders to reduce bets on another 50 basis point rate cut by the Federal Reserve next month, with futures pointing to just a 35 percent chance of such a scenario occurring.
“The US services ISM strongly beat all forecasts. It certainly points to a robust US economy,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets. “Our baseline assumption remains that the US labor market is normalizing rather than failing.”
The euro was little changed at $1.1031, although a weekly decline of 1.2 percent was expected. Sterling rose 0.03 percent to $1.3131, recouping losses after falling more than 1 percent on Thursday.
Sterling had been weighed down by dovish comments from Bank of England Governor Andrew Bailey, who said the central bank could become “a little more activist” on rate cuts if there is more good news on inflation.
Elsewhere, spot gold rose 0.06 percent to $2,657.89 an ounce.
Disclaimer:
The information contained in this post is for general information purposes only. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the post for any purpose.
We respect the intellectual property rights of content creators. If you are the owner of any material featured on our website and have concerns about its use, please contact us. We are committed to addressing any copyright issues promptly and will remove any material within 2 days of receiving a request from the rightful owner.