By Rae Wee

Asian Stocks Dip Amid Rising Oil Prices

SINGAPORE (Reuters) – Asian stocks retreated on Friday, while oil prices headed for their sharpest weekly gain in more than a year. Escalating tensions in the Middle East kept markets on edge ahead of a U.S. jobs report later in the day.

U.S. President Joe Biden stated on Thursday that the U.S. is discussing strikes on Iran’s oil facilities in retaliation for Tehran’s missile attack on Israel. Meanwhile, Israel’s military conducted new air strikes in Beirut targeting Lebanese armed group Hezbollah.

Biden’s comments triggered a surge in oil prices, which were already on the rise this week due to the escalating conflict in the Middle East.

Oil Prices
Brent crude futures eased 0.04% to $77.59 a barrel on Friday but were poised for a weekly gain of about 7.8%, the largest since February 2023. U.S. West Texas Intermediate (WTI) crude futures steadied at $73.71 per barrel and were on track for an 8.1% weekly advance, the most since March 2023.

Analyst Tony Sycamore noted, “I think we’re probably not far away from getting an Israeli response. The concern is that President Biden confirmed that Iranian oil facilities were discussed as potential targets.” There was an air of caution in trading as uncertainty about the timing and specific targets loomed over markets.

Stock Market Reactions
Most equities were in the red on Friday due to this uncertainty. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.32% and was set to end the week little changed. Australian shares dropped 1%, while stock futures continued to decline.

S&P 500 and Nasdaq futures eased 0.03% each, while EUROSTOXX 50 futures remained flat. Japan’s Nikkei, after reversing early gains, traded 0.08% lower and was facing a weekly loss of over 3%.

Japanese officials, including Prime Minister Shigeru Ishiba, stated that economic conditions were not favorable for further rate hikes by the Bank of Japan (BOJ), contributing to a weakening yen. Though it gained slightly on Friday, the yen was on track for a weekly decline of roughly 3%, its sharpest drop since 2016.

In some positive news, U.S. dock workers and port operators reached a tentative agreement that ended a crippling three-day strike disrupting shipping on the U.S. East Coast and Gulf Coast.

U.S. Economic Outlook
Attention was also focused on the upcoming U.S. nonfarm payrolls report, expected to indicate that the economy added 140,000 jobs last month, slightly down from 142,000 in August. Prior to the release, the dollar remained near a six-week high against a basket of currencies at 101.92.

Data released this week pointed to a resilient U.S. economy, bolstered by strong growth in new orders in the services sector, which reached a 1-1/2-year high in September. Reports indicated a steady labor market, reducing bets for a substantial rate cut by the Federal Reserve next month.

Alvin Tan, head of Asia FX strategy at RBC Capital Markets, expressed confidence in the U.S. economy, stating, “Our base case assumption remains that the U.S. labor market is normalizing rather than faltering.”

The euro was little changed at $1.1031, set for a 1.2% weekly drop. The British pound edged up to $1.3131 as it attempted to recover after dropping over 1% on Thursday due to dovish comments from Bank of England Governor Andrew Bailey regarding potential rate cuts.

Market Summary
Spot gold rose 0.06% to $2,657.89 an ounce.