Asian shares bounced on Friday, but were set for a second straight weekly loss and remained near June 2020 lows, while the dollar hovered near 20-year highs as investors digested concerns about strong inflation and tightening central bank policy.
Those concerns ultimately overcame hopes on Wall Street that high inflation might be peaking, pushing the S&P 500 close to confirming a bear market on Thursday, at nearly 20% off its January all-time high.
In an interview later in the day, US Federal Reserve Chair Jerome Powell said the battle to control inflation would “include some pain”. And he repeated his expectation of half-percentage-point interest rate rises at each of the Fed`s next two policy meetings, while pledging that “we`re prepared to do more”.
After sharp losses a day earlier, Asian shares rallied on Friday. European equities were also set for a firmer open, with pan-region Euro Stoxx 50 futures up 1.08%, German DAX futures up 0.93% and FTSE futures gaining 0.98%.
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In afternoon trade, MSCI`s broadest index of Asia-Pacific shares outside Japan was up around 1.8% from Thursday`s 22-month closing low, trimming its losses for the week to less than 3%.
Australian shares gained 1.93%, while Japan`s Nikkei stock index jumped 2.64%.
In China, the blue-chip CSI300 index was up 0.61% and Hong Kong`s Hang Seng rose 2.22%.
“We had some pretty big moves yesterday, and when you see those big moves it`s only natural to get some retracement, especially since it`s Friday heading into the weekend. There`s not really a new narrative that`s come through , ” said Matt Simpson, senior market analyst at City Index.
“I think there comes that point where you run out of sellers. I`m not really sure that this is going to be a buying rally at the moment, possibly a short-covering rally ahead of the weekend.”
The moves higher in equities were mirrored in slipping US Treasuries, with the benchmark US 10-year yield edging up to 2.8895% from a close of 2.817% on Thursday.
The policy-sensitive 2-year yield was at 2.5924%, up from a close of 2.522%.
“Within the shape of the US Treasury curve we are not seeing any particularly fresh recession/slowdown signal, just the same consistent marked slowing earmarked for H2 2023,” Alan Ruskin, macro strategist at Deutsche Bank, said in a note.
The US dollar remained near 20-year highs against a basket of currencies, supported by safe haven demand as Russia bristled over Finland`s plan to apply for NATO membership, with Sweden potentially following suit.
Moscow called Finland`s announcement hostile and threatened retaliation, including unspecified “military-technical” measures.
The dollar index, which tracks it against a group of currencies of other major trading partners, edged down about 0.1% to 104.65. But the greenback was stronger against the yen, which traded at 128.62 per dollar after hitting a two-week peak of 127.5 hit overnight.
The European single currency was 0.1% firmer at $1.0389 after trading lower earlier in the day.
Cryptocurrency bitcoin also turned higher, cracking through $30,000 after the collapse of TerraUSD, a so-called stablecoin, drove it to a 16-month low of around $25,400 on Thursday.
In commodities markets, oil prices were higher against the backdrop of a pending European Union ban on Russian oil, but were still set for their first weekly loss in three weeks, hit by concerns over inflation and China`s COVID lockdowns slowing global growth.
US crude ticked up 1.32% to $107.53 a barrel, and the global benchmark Brent crude was up 1.6% at $109.17 per barrel.
Spot gold, which had been driven to a three-month low by the souring dollar, was up 0.16 % at $1,824.61 per ounce.