By Ray Wee
SINGAPORE (Reuters) – Asian stocks fell on Friday while oil prices headed for their biggest weekly gain in more than a year, as rising tensions in the Middle East kept markets on edge ahead of the U.S. jobs report due later in the day.
US President Joe Biden said on Thursday that the United States is discussing launching strikes on Iranian oil facilities in response to Tehran’s missile attack on Israel, while the Israeli military hit Beirut with new air strikes in its battle against the Lebanese militant group Hezbollah.
His comments sparked a rise in oil prices, which had already risen this week in the wake of the expanding conflict in the Middle East.
Futures fell 0.04 percent to $77.59 a barrel on Friday, but are heading for a weekly gain of about 7.8 percent, the largest since February 2023.
US West Texas Intermediate crude futures settled at $73.71 per barrel, and were on track to rise by 8.1% during the week, the highest level since March 2023.
“I think we’re probably not that far away from getting an Israeli response,” said Tony Sycamore, a market analyst at IG. “Obviously the concern is that President Biden has confirmed that Iranian oil facilities have been discussed as a potential target.”
“If we wake up on Saturday or Sunday morning to find out there’s a response, it wouldn’t surprise me at all. There’s very cautious trading ahead of that. We know it’s coming, it’s just creating uncertainty because we don’t know it.” “I don’t know what the timing is, and of course we don’t know what they decided regarding the goals.”
In turn, the cautious atmosphere left most stocks in the red on Friday.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.32% and was set to end the week little changed.
Australian shares fell by 1%, while stock futures continued their declines from the previous session.
Nasdaq futures fell 0.03% each, while EUROSTOXX 50 futures remained flat.
It also reversed early gains to close the last trade down 0.08%. It was heading for a weekly loss of more than 3%.
The Nikkei saw a choppy few sessions this week as investors weighed rising geopolitical tensions against expectations for domestic interest rates.
Japanese officials, including Prime Minister Shigeru Ishiba, said this week that economic conditions in the country are not ready for further rate hikes by the Bank of Japan, and that the central bank should be cautious in tightening policy further.
The comments sent the yen falling beyond 147 yen to the dollar, although it traded higher on Friday and last reached 146.60 yen to the dollar.
However, the Japanese currency is headed for a weekly decline of about 3%, its largest decline since 2016.
In some good news, U.S. dockworkers and port operators have reached a tentative agreement that immediately ends a crippling three-day strike that has ground shipping on the U.S. East Coast and Gulf Coast, both sides said Thursday.
Economic flexibility
The focus was also on the US non-farm payrolls report due later on Friday, which should provide further clues about the Fed’s interest rate outlook.
Expectations indicate that the world’s largest economy added 140,000 jobs last month, a slight decrease from August’s increase of 142,000 jobs.
Ahead of the report, the dollar settled near its highest level in six weeks against a basket of currencies and was last at 101.92.
A series of data this week indicated that the US economy remains in a strong position, after the country’s services sector activity jumped to the highest level in a year and a half in September amid strong growth in new orders, while a separate report was released from the Federal Reserve. The Labor Department showed Thursday that the labor market is slippery at the end of the third quarter.
That has prompted traders to scale back their bets on another 50 basis point rate cut by the Fed next month, with futures indicating only a 35% chance of such a scenario.
“The US ISM Services Index has delivered a strong beat to the upside, beating all expectations. It definitely points to a strong US economy,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets. “Our basic assumption remains that the U.S. labor market normalizes rather than falters.”
There was little change in the euro at $1.1031, although it is heading for a weekly decline of 1.2%. The British pound rose 0.03 percent to $1.3131, recovering from its losses after falling more than one percent on Thursday.
The pound was affected by cautious comments from Bank of England Governor Andrew Bailey, who said the central bank could become “a little more active” on interest rate cuts if there is more good news on inflation.
Elsewhere, it rose 0.06% to $2,657.89 an ounce. (Ghoul/)
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