Asian shares fall after wild swings in bonds, FX; US jobs data looms

By Stella Qiu

SYDNEY, Oct 2 (Reuters) – Asian shares fell on Friday as investors grappled with wild swings in bond and currency markets ahead of key US jobs data, while a widening US military buildup in the Gulf kept oil prices elevated and inflation risks alive.

European bourses are set for a higher open, with pan-region stock futures up 0.2% after losses overnight. Nasdaq futures rallied 0.5% and S&P 500 futures gained 0.3%.

Much is riding on US nonfarm payrolls due later in the day. Forecasts are centred on a gain of 90,000 jobs in September, while the unemployment rate is expected to be steady at 4.1%.

A hot print could revive bets on a second rate rise from the Federal Reserve this month, currently priced at just 25% after two top policymakers said this week they wanted more data before deciding what to do next with interest rates. A move in December is still fully priced in.

That would also push Treasury yields higher again, ending a brief respite overnight after the benchmark 10-year yield hit a 24-year high of 5.34% following its biggest quarterly rise in 32 years. The US ISM Manufacturing PMI showed a huge jump in the prices paid component, pointing to more cost pressures.

“With the Fed now myopically focused on inflation and price pressures, a hot wages print could prove particularly influential for US rates, Treasuries and the USD,” said Chris Weston, head of research at Pepperstone.

“Risk assets have so far absorbed the rise in US real yields, and long-end nominal Treasury yields remarkably well. However, a sustained increase in term premium could be far more problematic.”

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.3% and was on track for a weekly decline of 1.5%. Japan’s Nikkei dropped 1.1% but was set for a gain of 2.8% for the week.

Mainland Chinese markets are closed through next Wednesday for a public holiday. Hong Kong’s Hang Seng index slid 2.6% on Friday after returning from a holiday.

PROBLEMS IN EUROPE

Dovish comments from Fed officials drove a big rally in 2-year Treasuries overnight, with the yield curve bull steepening as short-end yields fell. The 2-year yield was last up 1 basis point at 4.7934%, after falling 10 bps overnight.

The 10-year Treasury yield rose 2 bps to 5.2495%, having dropped 6 bps overnight to ease from a 24-year high of 5.3445% as the brutal selloff finally tempted some buyers back into the market.

The rout in European bonds, with French yields hitting 14-year highs, may have also helped drive safe-haven flows back to US Treasuries, the dollar and the Swiss franc.

Fiscal worries in France pushed the spread between French and German sovereign bond yields above 140 basis points, the widest since 2012, rattling European stocks and hitting the euro hard.

The euro was nursing losses at $1.1250, having slid 0.8% overnight to hit the lowest level since May 2025. It also sank against the yen and the franc overnight, down 0.8% and 1%, respectively.

The US dollar index, which gauges the currency against six peers including the euro and franc, was firm at 102 on Friday, having rallied 0.6% overnight to hit the highest level since April 2025. It is set for a third straight week of gains, up 1%.

The yen firmed 0.1% at 157.8 per dollar after data showed underlying inflation in Japan’s capital accelerated to an annual rate of 2.7% in September, bolstering the case for further interest rate hikes.

Oil prices remained elevated on Friday after jumping overnight, with the US reportedly sending more troops and another aircraft carrier to the Middle East. China also suspended oil product exports, stoking fears that global fuel shortages could worsen.

US West Texas Intermediate crude futures slipped 0.4% to $92.46 a barrel, after rising nearly 3% overnight. The contract for Brent crude futures rolled, but the price held above $102 a barrel.

(Reporting by Stella Qiu; Editing by Kevin Buckland and Jamie Freed)