Asian shares experienced a significant decline on Friday, extending a global downturn triggered by ambiguous U.S. jobs data. This data failed to provide investors with the clarity they sought regarding the future of interest rates. Despite a strong earnings report from Nvidia, Wall Street reacted negatively, reflecting market jitters over the inflated valuations of tech stocks. The Nasdaq experienced its widest one-day swing since April, highlighting the volatility in the market.
The U.S. economy added more jobs than anticipated in September; however, an increase in the unemployment rate and downward revisions of prior employment figures created uncertainty for the Federal Reserve as it contemplated potential interest rate adjustments next month. Following the jobs report, Treasury yields decreased, with futures indicating a growing 40% likelihood of a rate cut in December, an increase from 30% just a day prior. Yet, the forthcoming payroll data before the Federal Reserve meeting contributed to lingering investor skepticism regarding any near-term easing.
In Asia, the decline was palpable. The MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 1.8%, marking a 3% weekly loss, the largest since early April. Japan’s Nikkei index fell by 1.8%, with a total decline of 2.8% for the week. Taiwan and South Korea markets saw significant losses as well, with drops of 2.7% and over 3%, respectively. Chinese indices suffered, with blue-chip shares down 1.1% and Hong Kong’s Hang Seng index decreasing by 1.7%.
Commenting on the overall market sentiment, Kyle Rodda, a senior analyst at Capital.com, noted that while Nvidia’s strong quarterly performance and favorable U.S. jobs data initially energized Wall Street, the prevailing bearish sentiment overshadowed these positive signals. He succinctly expressed that the momentum needed to sustain the rally was not present.
Within the Federal Reserve, officials conveyed a cautious stance on inflation, voicing concerns about financial market stability and the unpredictable trajectory of asset prices. Cleveland Fed President Beth Hammack warned of the economic risks tied to further rate cuts, while Fed Governor Lisa Cook emphasized the potential for substantial declines in asset prices.
In the currency markets, the dollar rose against risk-sensitive commodity currencies, achieving a three-month peak against the Australian dollar and a seven-month high against the New Zealand dollar. Meanwhile, the yen fluctuated following comments from Japanese Finance Minister Satsuki Katayama regarding potential interventions to manage excessive volatility. The currency stabilized at 157.40 per dollar after hitting a ten-month low of 157.9, influenced by expectations of a significant economic stimulus package from the Japanese government amounting to over 20 trillion yen.
Recent data from Japan revealed a 3% increase in core consumer prices for October, fueling speculation around an imminent interest rate hike. Treasury yields showed little movement, with two-year yields steady at 3.554%, down 4 basis points overnight, and the 10-year yield also remaining flat at 4.098%.
In the commodities market, oil prices continued to decline, influenced by U.S. government negotiations for peace in Ukraine. West Texas Intermediate crude dipped by 1% to $58.38, reflecting a 2.8% decrease for the week. Additionally, spot gold prices fell by 0.2% to $4,069 per ounce, maintaining stability following the overnight session.
