- Nikkei slumps 2.2%, South Korea plunges 3.7%
- Dollar scales new peaks vs yen, Aussie, kiwi
- Japan unveils stimulus package, bond yields retreat from highs
SYDNEY, Nov 21 (Reuters) - Asian shares extended a global rout on Friday as a highly anticipated U.S. jobs report failed to provide clarity on the near-term path for interest rates, with investors dumping risk assets even after Nvidia's earnings dazzled.
European markets are bracing for a sharply lower open, with EURO STOXX 50 futures down 1.4% and FTSE futures off 1%. Wall Street futures were up 0.2% in Asia trading.
U.S. stocks fell overnight on jitters over inflated tech stock prices - despite Nvidia's stellar forecasts - resulting in the Nasdaq's widest one-day swing since April 9 when the Trump administration's tariffs spooked markets.
Data showed the U.S. economy added far more jobs than expected in September, but a rise in the unemployment rate and downward revisions to prior months painted a murky picture for the Federal Reserve as it considers its interest rates next month.
Treasury yields fell as futures moved to imply a 40% probability of a U.S. rate cut in December, up from 30% a day earlier, but with the next jobs report only available after the Fed meeting, investors were unconvinced that easing would come next month.
On Friday, MSCI's broadest index of Asia-Pacific shares outside Japan tumbled 2.2% to bring its weekly loss to 3.5%, the most substantial since early April. Japan's Nikkei fell 2.2% and was down 3.3% for the week.
Shares in Taiwan dropped 3.4% while South Korea's market plunged 3.7%.
Chinese shares also took a beating, with the CSI 300 and Hong Kong's Hang Seng index both off 1.5%.
"There is no doubt that the U.S. tech sector has many bubble-like characteristics ... but this does not mean that prices have to pop," said Diana Mousina, deputy chief economist at AMP. "The bubble could just deflate a bit."
"Now that the government shutdown is over, Trump and his team are making more concessions and tariffs and U.S. shares usually perform well in November and December due to seasonality, (so) shares should have a better end to the year."
Overnight, Fed officials struck a cautious tone on inflation. Some voiced emerging concerns about financial market stability, including the potential for a sharp drop in asset prices, as they debated when and even whether to cut interest rates more.
Cleveland Fed President Beth Hammack warned that cutting rates further right now carried a wide range of risks for the economy. Fed Governor Lisa Cook said she saw a risk of outsized asset price declines.
JAPAN UNVEILS STIMULUS PACKAGE
On Friday, Japan's cabinet, led by Prime Minister Sanae Takaichi, approved a 21.3 trillion yen ($135.5 billion) economic stimulus package, her first major policy initiative as leader.
Concerns about growing fiscal expansion have weighed on the Japanese yen, which was struggling at 157.24 per dollar , just above a 10-month low. The rapid depreciation in the Japanese currency - down 6% this quarter - has raised the risk of an imminent government intervention.
Bond investors breathed a sigh of relief after Takaichi said overall JGB issuance is expected to be smaller than last year's. The yield on ten-year Japanese government bonds fell 3 basis points to 1.785%, moving away from a 17-year peak of 1.835%.
Meanwhile, data showed Japan's core consumer prices rose 3% in October, keeping alive expectations of a near-term rate increase. Bank of Japan Governor Kazuo Ueda said the central bank would debate the "feasibility and timing" of a rate rise in upcoming meetings.
"If the Japanese yen remains weak and forthcoming data confirm both economic recovery and increasing inflation, we think the BOJ will act, basing its decision on data and maintaining independence from political influence," said Min Joo Kang, a senior economist at ING.
Treasuries steadied after gaining overnight. Two-year Treasury yields were flat at 3.545%, having fallen 4 basis points overnight, while the 10-year yield was little changed at 4.0922% after easing 3 bps in U.S. trading hours.
Oil prices extended their overnight slide on Friday as the U.S. government pushed for Ukraine's acceptance of a peace agreement with Russia. U.S. West Texas Intermediate crude dropped 1.2% to $58.29 and was down 3% this week.
Spot gold prices were off 0.5% to $4,055 per ounce; they were little moved overnight.
Reporting by Stella Qiu; Editing by Shri Navaratnam and Thomas Derpinghaus
Source: Reuters