Wall Street was headed for a weaker start, with little in the way of economic data for markets to digest, though Thursday's sell off in U.S. government bonds paused on Friday before the opening bell for U.S. stocks."The US calendar is empty today and the focus will likely be on bond market dynamics after back-end yields touched fresh multi-year highs yesterday," ING bank analysts said.
Jason Da Silva, director, global investment strategy at Arbuthnot Latham, said stock markets were paying the price for bond yields soaring as economic data from the United States smash expectations, despite all the rate hikes so far. Ten-year U.S. Treasury yields eased 8 basis points to 4.2251%, after surging about 30 basis points this month alone to a 10-month top of 4.3280% and near the highest levels since 2007.
"The bond yields are saying you are probably going to have to keep rates higher for longer, and if growth starts to really pick up again, we might need to tighten further and stock markets are not liking that," Da Silva said. In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.9% to flirt with nine-month lows, bringing the total loss for the week to over 3%. That marked the third straight week of declines for the index.
The onshore yuan moved away from a nine-month trough after the central bank set the daily fixing much higher than expected to support the currency, with traders on edge for any more direct intervention by Beijing or state-owned banks.Data on Friday showed Japan's core inflation slowed in July, a result that is likely to support market wagers that the Bank of Japan is in no hurry to phase out monetary easing.