Asian stocks rose on Friday as fears of an economic slowdown cooled somewhat, although news of the shooting of former Japanese Prime Minister Shinzo Abe jolted Japanese stocks and sent the safe-haven yen higher.
Abe was shot dead while campaigning in the city of Nara, a government spokesman said, causing the dollar to fall 0.4% against the yen and the Nikkei stock index to cut his gains.
The benchmark equities last rose 0.5% after hitting a 10-day high earlier in the session.
“While details are still scarce, risk aversion is set to rise and global equities could see a sell-off,” said Charu Chanana, market strategist at Saxo Capital Markets.
“We’ve seen risk aversion build with the yen gaining in knee-jerk reaction, and that move could intensify as London enters,” she added.
MSCI’s broadest index of Asia-Pacific stocks outside Japan last traded 0.3%, after also paring earlier gains, with South Korea’s KOSPI index leading load up 0.8% and gearing up for its best week in five months.
Eurostoxx 50 futures traded flat and S&P500 e-mini futures lost 0.4%, however.
The rally in Asian stocks followed a positive close for the three major US indices overnight on encouraging comments from Federal Reserve officials.
Governor Christopher Waller called recession fears “overblown”, while St Louis Fed Bank President James Bullard said he saw a “good chance” of a soft landing for the US. economy.
Waller suggested the Fed would likely try to fight inflation with an interest rate hike of 75 basis points in July and a 50 basis point hike in September.
However, he said, “if inflation just doesn’t seem to be coming down, we need to do more,” allowing for possible future hikes of 25 basis points.
The latest indicator of the health of the US economy is expected later today with the release of US nonfarm payrolls data. The consensus expects 268,000 jobs to have been added in May.
“How the market will react to deviations from this expectation is debatable,” ING’s Robert Carnell and Iris Pang said in a client note.
“You could say that a stronger number will mean the Fed has more work to do, and thus increases the prospects of a harder landing. But sometimes the market reaction is more simplistic than you might imagine.
The pound was stable at $1.201 after rising 0.8% overnight when British Prime Minister Boris Johnson announced he would step down, essentially where he was at the start of the week after experiencing some trouble. difficult days amid Britain’s political turmoil.
“In our view, the pound should soon lose its gains given the prospect of a weaker UK economy,” said Carol Kong, currency strategist at Commonwealth Bank of Australia.
The euro meanwhile continued to languish at $1.0149, around its lowest level in 20 years.
Oil prices were volatile as recession fears continued to weigh on sentiment, although concerns about global supply shortages limited price declines.
Brent crude last rose 0.55% to $105.26 a barrel, while U.S. crude rose 0.17% to $102.9.
US Treasury yields were a fraction lower, with the benchmark 10-year bond yield at 2.9798% and the two-year yield at 2.9976%.
Bitcoin jumped 1.7% to hit $22,200 around its highest price in more than three weeks. It’s up nearly 15% this week, heading for its best week since early May.
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