SYDNEY Asian shares had gone for the worst month since the COVID 19 pandemic, while jitters in currency and bond markets persisted over talk from central banks, worries about the global recession and rising geopolitical risk.
The broadest index of Asia-Pacific shares outside Japan was flat on Friday. Japan's Nikkei fell 1.6 percent.
The Asian index was poised to record a 12.5 percent drop for the month, the largest since March 2020 when the COVID-19 epidemic threw financial markets into chaos.
Timothy Moe, chief Asia-Pacific equity strategist at Goldman Sachs, said that the troubling triad of rising rates, slowing growth and strong dollar has intensified.
We reduce our forecasts further and expect a flat regional performance over the next two quarters with better returns on a 12 month view. The risk of intervention from central banks kept traders edgy in currency markets.
The US dollar fell by 0.9 percent against a basket of major currencies at 111.88 on Friday.
It is the best since April, up 2.9 percent for the month. The Japanese yen has been pushed by the relentless rise of the dollar.
Britain's gilt market is roiled by government plans for heavy borrowing to finance spending, which has led to the pound being roiled in Europe.
Prime Minister Liz Truss said on Thursday that she will stick to her plan to reignite economic growth, breaking her silence after nearly a week of financial market chaos.
A 200 billion euro US$96 billion defensive shield was set up by German Chancellor Olaf Scholz, including a gas price brake and a reduction in sales tax for the fuel, to protect companies and households from the impact of soaring energy prices.
The European Central Bank expressed support for a big interest rate hike, as Europe braces for a double-digit inflation reading later in the day. The German inflation accelerated to 10.9 percent this month, far beyond market expectations.
There is a correlation between higher uncertainty and risks and higher interest rates that are logically linked to higher volatility in financial markets. Even G 7 countries are trading like emerging markets, said Jan Lambregts, head of global economics and markets research at Rabobank.
Markets now see a wider range of possible outcomes when it comes to FX and rate movements. After a renewed bout of selling on hawkish talks from Federal Reserve officials, the yield on 10 year bonds went up by 4 basis points in early Asia to 3.7815 percent.
The two-year Treasury yield went up to 4.2048 percent.
A strong US jobs market with weekly jobless claims hitting a five-month low adds to the case of more aggressive tightening from the Fed. Overnight hawkish comments from Fed officials gave no indication that recent foreign exchange and bond market drama will lead to the central bank backing off from its rate hike course.
Oil prices were not changed in early trade on Friday. US crude went up 0.11 percent to US $81.32 a barrel, while Brent crude rose to US $88.51 per barrel.
Gold was slightly higher. Spot gold was traded at US $1663.29 per ounce.