Asia shares hobbled by rising bets of looming Fed hike

Asian shares slipped on Friday, ahead of key US employment data later in the session that was expected to add to the case for a Federal Reserve interest rate hike as early as next month.

MSCI's broadest index of Asia-Pacific shares outside Japan edged down about 0.1%, though it remained on track for a 1% weekly rise.

Japan's Nikkei added 0.7%, poised for 0.8% weekly gain.

Wall Street marked modest losses after a mixed spate of earnings, as investors waited for the non-farm payrolls report.

Economists expect the report to show that US employers added 180,000 jobs in October, which would be above September's increase of 142,000 jobs.

 

New US applications for jobless benefits last week recorded their biggest increase in eight months, but remained above the threshold associated with a healthy labour market.

"We're a little below consensus," said Jennifer Vail, head of fixed-income research at US Bank Wealth Management in Portland, Oregon.

But based on recent comments from central bank officials, "It looks as if as long as we hit a 150-number, the Fed will think it's consistent with labour tightening," she said, adding that US yields and futures were increasingly showing expectations for a December hike.

Federal Reserve Chair Yellen and New York Fed President William Dudley said this week that the US was ready for higher interest rates if upcoming economic data justified them.

On Thursday, US interest rates futures implied traders saw a 58% probability of a rate increase in December, according to CME Group's FedWatch program, while US two-year Treasury yields > hit their highest levels in 4-1/2 years.

Higher yields and rising expectations of a December rate hike lifted the dollar index, which last stood at 97.951, not far from a three-month peak of 98.135 scaled overnight.

The dollar was fetching 121.70 yen > after touching a 2 1/2-month high of 122.01, while the was at $1.0884 > after dropping to a nadir of $1.0834, its lowest level in more than three months.

The stronger dollar added further pressure to crude oil futures, which were already dragged down by oversupply concerns.

US crude took back some lost ground, adding about 0.5% to $45.41 a barrel, but was still on track to lose 2.5% for the week.

Other commodities also struggled, with copper sliding to its lowest level in a month overnight. Spot gold > steadied at $1,105.26 an ounce after plumbing a nearly two-month low on Thursday, and was on track to shed over 3% for the week.