Asian stocks fall and Europe subdued ahead of central banker speeches

Receive free Markets updates

We’ll send you a myFT Daily Digest email rounding up the latest Markets news every morning.

Asian stocks fell and European markets were subdued on Friday, after strong jobs data and hawkish comments from a senior Federal Reserve official made investors nervous ahead of a closely watched central bank conference.

Hong Kong’s Hang Seng index fell 1.2 per cent, China’s CSI 300 lost 0.4 per cent and Japan’s Topix shed 0.9 per cent, following falls overnight on Wall Street.

In Europe, the pan-European Stoxx Europe 600 index reversed earlier losses to trade up 0.1 per cent, while France’s Cac 40 and Germany’s Dax were also just in positive territory.

Investors are poised for the annual gathering of central bankers in Jackson Hole, Wyoming, where Fed chair Jay Powell and European Central Bank president Christine Lagarde are set to speak.

The conference comes at a time of heightened market anxiety over the future of global interest rates, as investors debate how long it will take before key central banks can declare victory in their battle against inflation.

Until recently, the majority of market participants believed that the Fed was done raising its benchmark federal funds rate, currently at a 22-year high, but signs of a tight labour market and robust consumer spending pushed some traders to price in the probability of another tightening round this autumn. 

Boston Fed president Susan Collins said in an interview on Thursday that while the US central bank had approached the peak of its rate tightening cycle, there remained “a very real possibility that [it] will need to make some additional increments”. 

Adding fuel to the fire, a lower-than-expected reading for new US jobless claims — a proxy for lay-offs — suggested that high borrowing costs were yet to feed through to the jobs market. 

“Inflation data will now take a back seat as it’s following a more or less predicted path,” said Mohit Kumar, chief Europe financial economist at Jefferies. “Uncertainty lies with the employment picture that has proven to be much more robust than most investors were expecting.”

The dollar, which tends to climb when investors forecast higher rates, rose 0.2 per cent against a basket of six other currencies, touching its highest level since the end of May. 

The sell-off in US government bonds, which took yields on long-term debt to a 16-year high at the start of this week, continued on Friday, as yields on the benchmark 10-year US Treasuries added 0.01 percentage points to 4.25 per cent. Bond yields rise as prices fall. 

Futures contracts tracking Wall Street’s benchmark S&P 500 rose 0.1 per cent, while those tracking the tech-focused Nasdaq 100 declined 0.1 per cent ahead of the New York opening bell.