MSCI’s broadest index of Asia-Pacific shares outside Japan plummeted 2.54%
Asian shares were headed for their worst day in more than two years and U.S. Treasury yields slipped, while the Swiss franc and yen gained on safety bids on Friday after weaker-than-expected U.S. factory data triggered concerns of a worsening economic outlook.
Japan’s Nikkei was meanwhile headed for its worst day in more than four years, tracking a decline on Wall Street and weighed down by a soaring yen, as well as uncertainty over how high domestic interest rates could rise.
The gloomy mood in Asia, triggered by Thursday’s data which showed a measure of U.S. manufacturing activity declined to an eight-month low in July, looked set to continue into Europe, as EUROSTOXX 50 futures dropped 0.8%.
FTSE futures were little changed, while U.S. stock futures extended their declines. Nasdaq futures skidded 1.35% and S&P 500 futures stumbled 0.76%.
MSCI’s broadest index of Asia-Pacific shares outside Japan plummeted 2.54%, tracking a sharp selloff on Wall Street, and was headed for its worst day since June 2022.
Broad risk-off moves were evident across markets on Friday after the weak U.S. ISM manufacturing report stoked fears of an economic downturn and led investors to worry that the Fed may be behind the curve in reducing rates.
At the moment, if there’re any signs of weakness, then the market will grasp them. It is looking for bad news, according to Rob Carnell, ING’s regional head of research for Asia-Pacific.
In Asia, Japan’s Nikkei suffered heavy losses, slipping more than 5% to tumble below the 37,000 level for the first time since April.
It was last 4.9% lower, on track for its sharpest daily fall since March 2020.
The Nikkei’s decline has also come on the back of steep yen gains after the BOJ on Wednesday raised interest rates to levels unseen in 15 years and announced a detailed plan to slow its massive bond buying.
Hong Kong’s Hang Seng Index similarly skidded 2.13%, while Chinese blue-chips declined 0.66%.
Focus now turns to the non-farm payrolls (NFP) report later on Friday for further clues on the health of the U.S. labour market and the broader economy, likely to guide investor expectations of the pace and scale of Fed cuts expected later this year.
Futures point to an almost 29% probability of a 50-basis-point reduction from the Fed in September.