Asian shares fall, oil sees weekly gains on Middle East risks By Reuters

By Rae Wee

SINGAPORE (Reuters) – Asian shares retreated on Friday as oil prices headed for their strongest weekly gain in more than a year as rising tensions in the Middle East kept markets on edge ahead of a report on US jobs later in the day.

US President Joe Biden said on Thursday that the US was discussing strikes on Iran’s oil facilities in retaliation for Tehran’s missile attack on Israel, as Israel’s military hit Beirut with new airstrikes in its fight against the Lebanese armed group Hezbollah.

His comments sparked a rally in oil prices, which had already been rising this week following the widening of the Middle East conflict.

Futures fell 0.04 percent to $77.59 a barrel on Friday, but were on course for a weekly gain of about 7.8 percent, the biggest since February 2023.

U.S. West Texas Intermediate (WTI) crude futures settled at $73.71 a barrel and were on course to advance 8.1% on the week, the most since March 2023.

“I think we’re probably not far from getting an Israeli response. Obviously, the concern is that President Biden has confirmed that Iranian oil facilities have been discussed as a potential target,” said Tony Sycamore, market analyst at IG.

“If we woke up on Saturday or Sunday morning to find out there was an answer, that wouldn’t surprise me at all. So we trade very cautiously before that. We know it’s coming, it just creates uncertainty because it doesn’t “We don’t know what the timing is, and of course we don’t know what they’ve decided in terms of goals.”

The air of caution, in turn, left most stocks in the red on Friday.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.32 percent and was expected to end the week little changed.

Australian shares fell 1 percent, while share futures extended their losses from the previous session.

and Nasdaq futures fell 0.03% each, while EUROSTOXX 50 futures were flat.

it also reversed early gains to last trade 0.08% lower. It was heading for a weekly loss of more than 3%.

The Nikkei had a choppy few sessions this week as investors weighed rising geopolitical tensions against the domestic rate outlook.

Japanese officials, including Prime Minister Shigeru Ishiba, said this week that economic conditions in the country were not conducive to more interest rate hikes by the Bank of Japan (BOJ) and that the central bank should be cautious in tightening policy.

The comments caused the yen to weaken above the 147 per dollar level, although it traded higher on Friday and was last at 146.60 per dollar.

Still, the Japanese currency was heading for a weekly decline of about 3 percent, its biggest drop since 2016.

In good news, US dockworkers and port operators have reached a tentative agreement that will immediately end a crippling three-day strike that has halted shipping on the US East Coast and Gulf Coast, the two sides said Thursday .

ECONOMIC RESILIENCE

The focus was also on the key US non-farm payrolls report due later on Friday, which would provide further clues on the Federal Reserve’s exchange rate outlook.

The world’s largest economy is expected to have added 140,000 jobs last month, down slightly from a gain of 142,000 in August.

Ahead of the release, the greenback held near a six-week high against a basket of currencies and was last at 101.92.

A series of data released this week pointed to a U.S. economy still in solid shape after service sector activity rose to a 1-1/2-point high in September amid strong growth in new orders, while a A separate Labor Department report showed Thursday that the labor market eased at the end of the third quarter.

That prompted traders to reduce bets on another 50 basis point rate cut by the Fed next month, with futures indicating just a 35% chance of such a scenario.

“US ISM services beat strongly to the upside, beating all forecasts. It certainly points to a robust US economy,” said Alvin Tan, Head of Asia FX Strategy at RBC Capital Markets. “Our basic assumption remains that the US labor market is normalizing rather than faltering.”

The euro was little changed at $1.1031, although it was set for a weekly decline of 1.2%. Sterling rose 0.03 percent to $1.3131, paring losses after falling more than 1 percent on Thursday.

Sterling was weighed down by dovish comments from Bank of England Governor Andrew Bailey, who said the central bank could become “a bit more activist” on rate cuts if there is still good news on inflation.

Elsewhere, it rose 0.06 percent to $2,657.89 an ounce. (EMPTY/)