Asian shares pause for US jobs, oil extends gains on Mideast risk

Asian markets paused on Friday, awaiting the U.S. jobs data that could significantly impact the Federal Reserve's interest-rate decision for the following month. Concurrently, oil prices continued their upward trajectory, highlighting that tensions in the Middle East were far from resolved. MSCI's broad Asia-Pacific index, excluding Japan, remained flat during the week, while Japan's Nikkei and South Korea's KOSPI saw declines of 0.9% and 0.5%, respectively.

China's CSI 300 index managed a slight gain of 0.2%. After experiencing volatility due to concerns over the sustainability of the AI-driven rally, investors are now focused on the U.S. payrolls report, released later in the day. Forecasts anticipate an increase of 80,000 jobs for July, following a 57,000 gain in June, with the unemployment rate expected to remain steady at 4.2%.

Market sentiment remains uncertain about the Federal Reserve's potential rate hike, which is viewed as a 50/50 proposition. Michael Feroli, JPMorgan's chief U.S. economist, expects the NFP report to trade as a "good news is bad news" scenario, with strong job numbers supporting higher-for-longer pricing and pushing rates up, while a weaker report could ease yields and prompt a more dovish policy outlook.

Nasdaq futures held steady, whereas S&P 500 futures declined by 0.1%. European stock markets were expected to open lower, with pan-European futures down by 0.2%. Middle East tensions escalated after Yemen's Houthis targeted Saudi Arabia, a significant oil exporter. Riyadh issued a warning that coordinated attacks by Houthis and Iran-backed Iraqi militias could occur soon.

Brent crude futures rose by 1%, reaching $83.38 per barrel, after surging 3.8% the previous day. However, they were still on track for a weekly decline of 7.5% and had not approached their recent high of $102 a barrel two weeks prior. Iran is evaluating a draft bill that could prohibit U.S., Israeli, and other "hostile" vessels from navigating the Strait of Hormuz, imposing fines up to 20% of a vessel's cargo value for infringements.

Rising oil prices contributed to an increase in U.S. Treasury yields. The 2-year note yield remained at 4.2496% in Asia, following a 7 basis point rise overnight, while the 10-year yield held steady at 4.6757%, having gained 5 basis points overnight. The dollar remained relatively stable in Asia after a slight overnight gain. Against the Japanese yen, the dollar traded at 158.51 yen, up 0.4% from the previous day, surpassing its 200-day average of around 158.