Asia shares pare gains; Treasury yields, oil off highs

Investors look at computer screens showing stock information at a brokerage house in Shanghai, China, 21 April, 2016 – REUTERS

Reuters: Asian shares lost some of their recent gains on Friday, after lacklustre sessions on Wall Street and Europe, while 10-year U.S. Treasury yields and crude futures pulled back from multi-month highs hit overnight.

MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.6%, but remained on track to end the week up 0.6%.

Japan’s Nikkei, which jumped to an 11-month high on Thursday, slipped 0.6% on Friday. It is set for a weekly gain of 0.1%.

South Korean shares dropped 0.7%, extending weekly losses to 0.25%, after opposition parties said they would propose a motion later on Friday to impeach President Park Geun-hye over an influence-peddling scandal, with the intention of holding a vote on her impeachment on Dec. 9.

China’s CSI 300 index retreated 0.5%, shrinking gains for the week to 0.3%. Hong Kong’s Hang Seng index, which gave up 0.9%, is heading for a 0.2% weekly loss.

Yields for 10-year U.S. Treasuries pulled back to 2.439% on Friday, after touching 2.492% on Thursday, the highest since June 2015.

Investors are eyeing November’s non-farm payrolls report, due later in the session, for further evidence of improvement in the economy, after data showed factory activity accelerating in November and construction spending at a seven-month high in October.

The strong data boosted expectations of higher interest rates. Expectations for higher rates were already running high because of anticipated inflationary pressures from rising oil priced and President-elect Donald Trump’s promises of fiscal stimulus and infrastructure spending.

Global benchmark Brent futures jumped to a 16-month high of $54.53 a barrel on Thursday after the Organization of Petroleum Exporting Countries agreed its first output cut since 2008. Russia also agreed to reduce production for the first time in 15 years.

They pulled back 0.8% on Friday to $53.55 as investors took profits, but are set for a weekly rise of 13.4%.

Having climbed 13% in the past two days, U.S. crude surrendered some gains on Friday, falling 0.6% to $50.85. It is on track for an increase of 10.3% this week.

On Wall Street, while the Dow Jones Industrial Average set a record closing high, the S&P 500 and the Nasdaq ended the day with losses as expensive technology stocks pulled back.

Earlier, European markets also had a lacklustre session, with the STOXX 600 down 0.3% at the close after pulling back from the previous session’s three-week high.

Investors remained nervous ahead of a constitutional referendum in Italy and a presidential election in Austria this weekend.

“A weak lead from U.S. markets, Italy’s referendum and tonight’s release of U.S. jobs data all provide reasons for the stock market to close the week ina cautious, wait-and-see mode,” Spooner said.

The dollar, which hit the highest level since February versus the yen earlier on Thursday, retreated after weekly jobless claims, which hit a 43-year low in mid-November, rose to their highest level in five months last week.

The dollar was trading 0.3% lower at 113.77 yen on Friday, having also lost 0.3% on Thursday.

It remains on track for a weekly gain of 0.5%.

“The dollar could test the 115 yen threshold depending on how the U.S. jobs report turns out,” said Daisuke Karakama, market economist at Mizuho Bank.

The dollar index, which tracks the greenback against a basket of six major global peers, slipped 0.2% on Friday, extending losses for the week to 0.7%.

The British pound touched a near-two-month high versus the dollar on Thursday after Brexit minister David Davis said Britain would consider paying into the European Union budget for market access.

Sterling was steady at $1.2595 on Friday, heading for a weekly gain of 0.9%.

The euro also strengthened on Thursday, rising 0.7%, and added 0.1% to $1.0673 on Friday, putting it on track for a 0.9% increase this week.