As of now, oil prices are staring down their worst week in more than a year to hover just above a critical chart level, with their near-term fate depending on the payrolls report due later in the day.
MSCI’s broadest index of Asia-Pacific shares outside Japan edged 0.2% higher, having fallen 2.3% so far this week. The Nikkei slipped 0.1% to be down 3.9% for the week.
China’s sharemarkets opened mixed, while Hong Kong’s Hang Seng was flat.
The nervous markets, however, knocked the Nasdaq futures down 0.6% while S&P futures slipped 0.3%.
The Japanese yen is vulnerable to a sharp pull-back after its 2% rally this week and was last 0.1% higher at 143.27 per dollar.
There is a lot riding on the US non-farm payrolls report after the Federal Reserve chair Jerome Powell said policymakers do not welcome any further weakening in the labour market, laying the ground for a September rate cut.
Analysts are looking for a rise of 165,000 in new jobs and a dip in the unemployment rate to 4.2%.
However, risks are now to the downside after soft job openings and fewer job gains in the private sector led markets to ramp up the chance of a half-point cut from the Fed to 42% this month.
Influential Fed governor Christopher Waller and New York Fed president John Williams will be speaking after the jobs data, giving the market a near-instant reaction.
Analysts at ING said even if the payrolls come in line with expectations, markets might still scale back the chance of a 50 basis point cut.
“We suspect the market is actually positioned for a sub-100k number. If we don’t get that type of validation for material slowdown, yields will be under pressure to rise for a bit,” said Padhraic Garvey, regional head of research, Americas, at ING.
Bonds rallied earlier in the week, although gains could quickly reverse depending on the payrolls data. Two-year Treasury yields fell 17 basis points so far this week to 3.7520%, the lowest since early 2023.
Ten-year yields were down 18 bps to 3.7330%, with the spread over two years on the verge of turning positive.
Oil is facing the worst week since October 2023 as demand worries weighed against a big withdrawal from US inventories and a delay to output increases by Opec+ producers.
The supply issues failed to elicit a jump in crude prices. Brent crude futures steadied on Friday, up 0.2% to US$72.8 a barrel, but were down 7.6% so far in the week.
They were pinned near a key range of US$70 to US$71, a break of which would open the way to levels not seen since late 2021.
Gold was flat at US$2,514 an ounce, just a touch below its record high.
In deals news, Japanese retail giant Seven & i Holdings said on Friday it had rejected Canada’s Alimentation Couche-Tard’s US$38.5 billion cash bid for the company because the proposal was not in the interest of shareholders.