Japan’s Nikkei lost 0.6 per cent and Australian stocks shed 0.1 per cent. Mainland China markets were closed for holidays.
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US August retail sales and manufacturing output fell more than expected, data released yesterday showed.
“Anyone still left calling for a September hike next week from the Federal Reserve must be feeling a bit hot under the collar after further signs of economic vulnerabilities”, Chris Weston, chief market strategist at IG in Melbourne, wrote in a note.
“The long end of global yield curves could see upward pressure based on this adjustment, as well as fiscal policy crowding out what would normally be private borrowers”, the firm said.
Already, the USA yield curve, reflected in the gap between five and 30-year yields, is near its steepest since July 1, while Japan’s two-year/30-year spread rose this week to 86 basis points, the steepest curve since mid-March. As of Friday afternoon, traders predicted only a 15 percent likelihood of a hike after its two-day meeting, according to the CME’s FedWatch website. “If 1.6 percent inflation and 4.9 percent unemployment were all you knew about the economy, would you consider a policy setting one tick above the zero lower bound still appropriate?” he said, referring to the core PCE price index, the Fed’s preferred inflation measure.
The benign rate environment has helped fuel major USA stock indexes to all-time highs in July and August.
Wall Street also benefited from a 3.4 per cent jump in Apple shares, after the company said that the first batch of its new iPhone 7 Plus sold out globally.
The Bank of Japan (BoJ) will conduct a comprehensive assessment of its current policy framework at a rate review on Sept 20-21 that aims to add impetus to its goal of achieving its 2% inflation target.
The Bank of Japan’s decision was put on the spotlight because of a report on Wednesday suggesting a further move on negative interest rates could be announced on the same day the Federal Reserve decision on a rate hike is announced, possibly producing spillover effects.
The dollar changed hands for just over 103 yen at one point, a level not seen in roughly a week.
So far an aggressive, three-year stimulus programme has failed to accelerate inflation to anywhere near its 2% target.
If the Fed, as expected, holds off, the focus will shift to its December meeting.
The dollar index was up 0.03 percent at 95.359.
In May 2013 then-Federal Reserve chairman Ben Bernanke hinted that the Fed would soon begin scaling back its QE bond-buying, and in April 2015 German bond prices buckled under the weight of historically extreme market positioning.
Brent crude settled up 74 cents, or 1.6 percent, at $46.59 a barrel, while US crude settled up 33 cents, or 0.76 percent, at $43.91. U.S. West Texas Intermediate futures were down 0.6 percent, at $43.67 a barrel.
Gold was steady after the resurgence in risk appetite pushed it down 0.7% on Thursday.
Among the big banks, Commonwealth Bank of Australia, Westpac, National Australia Bank and ANZ Bank are higher in a range of 0.7 percent to 1.0 percent.
An electronic board displaying the Tokyo stock index at a securities office in Tokyo, Japan.
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Banks make money by borrowing short-term funds cheaply and lending at higher rates over the longer term, while steeper curves help insurance firms and pension funds meet their long-term commitments.
