Japan’s Nikkei gained 0.3% and most other markets held on to slim gains but MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.7%, due to decline in Chinese and Hong Kong shares.
Shanghai Composite fell 1.2%, amid speculation the Chinese central bank could begin tightening monetary policy, and some possible unease among overseas investors over President Xi Jinping’s warning to foreign powers in a speech to mark his party’s centenary.
“It is hard to expect loose monetary conditions like before,” said Masahiko Loo, portfolio manager at AllianceBernstein in Tokyo.
“Foreign investors are probably turning cautious after hawkish rhetoric from China’s President Xi Jinping as well,” he added.
Xi said any foreign forces attempting to bully China would will “get their heads bashed”.
On Wall Street, the S&P 500 reached its sixth consecutive all-time closing high on Thursday, as a new quarter began with upbeat economic data.
Jobless claims continued their downward trajectory, touching their lowest level since the pandemic shutdown, and a report from Challenger, Gray & Christmas showed planned layoffs by U.S. firms were down 88% from last year, hitting a 21-year low.
A separate index on U.S. manufacturing showed factory activity slipping to 60.6 last month from 61.2 in May but still staying above 50, which marks expansion in manufacturing.
Monthly nonfarm payroll data, due out later on Friday, is expected to show a 700,000 increase in June, and economists expect wage growth in June of around 0.4%.
While the prospects of a strong economic recovery underpin equity markets, investors remained nervous that a sharp recovery from the pandemic could push up inflation to an uncomfortable level for the U.S. Federal Reserve.
“The situation remains uncertain and no one would have their forecast with high degree of confidence now. Markets will be very sensitive to any upticks in inflation,” said Tomo Kinoshita, global market strategist at Invesco.
In bond markets, the 10-year U.S. yield stood at 1.466%, largely staying below 1.5% in the past couple of weeks, in part thanks to subsiding inflation expectations.
In the currency market, the dollar was perched at a 15-month high on the yen and at multi-month peaks against other majors on Friday, as traders wagered strong U.S. labour data could lift it even further.
The dollar rose to as high as 111.66 yen, hitting its highest level since March last year.
The euro slipped to a three-month low of $1.1837 overnight and last stood at $1.1845.
The Australian dollar fell to $0.7461, having slipped to its lowest level since December on Thursday.
Oil prices held firm on indications that OPEC+ producers could increase output more slowly than expected in coming months while rising global fuel demand causes supply to tighten.
OPEC+ delayed its ministerial meeting until Friday to hold more talks on oil output policy, OPEC+ sources said on Thursday, after the United Arab Emirates blocked a plan for an immediate easing of cuts and their extension to the end of 2022.
U.S. crude futures traded at $75.01 per barrel, having reached as high as $76.22 on Thursday, its highest since October 2018. Editing by Simon Cameron-Moore