The Nub

An Asian stock index fell on Friday and a dollar gauge hovered near a record high ahead of key US jobs data that could stir expectations for another sharp Federal Reserve interest-rate hike. Drops in Japan and Hong Kong weighed on the region-wide equity index, while China’s bourses were mixed. US futures wavered after Wall Street snapped a four-day losing streak to eke out modest gains.

Why Does it Matter

The jobs update on Friday is expected to show healthy payrolls growth and follows a stronger-than-expected US manufacturing report. Traders increasingly anticipate another large 75 basis points Fed rate rise to cool inflation. The two-year Treasury yield was close to the highest since 2007 against that backdrop, while the Bloomberg Dollar Spot Index inched back but remained in sight of the unprecedented level hit on Thursday. The euro strengthened. Global bonds as a whole slumped into their first bear market in a generation: the Bloomberg Global Aggregate Total Return Index of government and investment-grade corporate bonds is down more than 20% from a 2021 peak.

What Next

US data showed manufacturing growth steadied in August and that a measure of materials costs fell for a fifth month in a sign of easing inflation pressures. The payrolls report later on Friday is projected to show a 298,000 gain and solid wage growth. Federal Reserve Bank of Atlanta president Raphael Bostic said there’s still some work to do to contain price pressures. Elsewhere, oil bounced above $88 a barrel, undoing much of the losses sparked by China’s move to lock down the metropolis of Chengdu to curb Covid. The latter step had amplified worries about the commodity demand outlook. Gold struggled to break above $1,700 an ounce, while Bitcoin held the $20,000 mark – the crypto version of the line in the sand.