Asian equities dropped in early trading following a lacklustre session on Wall Street that weighed on tech stocks and bonds, with focus turning to the release of key US inflation data later on Friday.
MSCI Inc.’s gauge for regional shares fell as much as 0.6%, with Japanese indexes leading declines after a strong rally in the previous session. The technology sector was the biggest drag on the regional benchmark. US futures were little changed after the S&P 500 climbed 0.1% in the previous session. The yield on 10-year Treasuries rose three basis points to 4.1% on Thursday, the dollar fluctuated and Bitcoin dropped below $93,000.
Federal Reserve officials will get a dated reading on their preferred inflation gauge, the personal consumption expenditures price index, on Friday. The September income and spending report — also delayed because of the government shutdown — is due to be released as well.
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The market moves underscore that risk sentiment remains fragile even as the S&P 500 has rebounded in the past two weeks to be within 0.5% of its record closing high. Those gains partly reflected easing concerns over tech valuations and confidence among traders that the Federal Reserve will deliver a 25-basis point interest-rate cut next week in its last meeting of the year.
“Participants are consciously reducing risk exposure before a key data window,” said Dilin Wu, a strategist at Pepperstone Group. “Even with high odds, PCE still has the power to shift the market’s timing and confidence in the path of rate cuts.”
Friday’s figures will include the PCE index and a core measure that excludes food and energy. Economists project a third-straight 0.2% increase in the core index. That would keep the year-over-year figure hovering just below 3%, a sign that inflationary pressures are stable, yet sticky.
US government bonds were sold off on Thursday as data showed signs of resilience in the jobs market. Applications for US unemployment benefits fell last week to the lowest in more than three years, indicating that employers are still largely holding onto workers despite a wave of recent layoffs.
Separate data from Challenger, Gray & Christmas showed announced layoffs at US companies fell last month after surging in October but were still the highest for any November in three years. Even so, bets on a Fed reduction remained intact.