Asian shares slipped for the week on Friday, weighed down by stubbornly high U.S. Treasury yields and crude oil prices, while the dollar index hovered near a three-month trough.
Japan’s Nikkei fell 0.8%, extending weekly losses to 4.4% as investors remained cautious ahead of next week’s U.S. Treasury auctions and key economic data. The broader MSCI Asia-Pacific ex-Japan index edged up 0.5%, paring some of the week’s declines but failing to offset broader risk-off sentiment.
European futures showed little directional bias, with EUROSTOXX 50 and DAX contracts marginally lower, while FTSE futures dipped 0.1%. U.S. stock futures pointed to a modestly positive open, with S&P 500 and Nasdaq contracts up 0.1% and 0.2%, respectively.
The U.S. dollar index fell nearly 0.9% for the week to 98.802, marking its lowest level in three months. The euro strengthened 1.0% against the dollar to $1.1686, touching a 14-week peak, while the dollar-yen pair held steady at 159.07.
U.S. Treasury yields remained elevated, with the 30-year bond yield rising to 5.25% and the 10-year yield hitting 4.71%. Markets are watching closely for signs that yields could breach perceived pain thresholds—5.30% for Treasuries and 160.00 yen for Japanese policymakers—as fiscal pressures mount. The U.S. budget deficit is projected to exceed 6% of GDP this year, with annual interest charges on federal debt running at $1.2 trillion.
Crude oil prices extended gains earlier in the week, with Brent crude reaching a one-month high of $94.71 before easing 0.7% to $93.12 a barrel on Friday. U.S. crude followed a similar trajectory, slipping 0.7% to $86.18. Gold held firm at $4,513 an ounce, up 3.1% for the week.
In corporate news, Walmart shares tumbled 9% on Thursday after the retailer reported a sales miss, while Nvidia faces a critical earnings test next week as investors assess demand for its data center infrastructure amid rising competition and regulatory scrutiny.
Analysts at Deutsche Bank warned that sustained fiscal imbalances and activist fiscal policies risk eroding market confidence. "Historically, markets push back when they believe fundamentals—such as record debt levels and historically large deficits—are on their side, and further interventions could become too costly to bear," said Steven Zeng, strategist at Deutsche Bank. He also cautioned that prolonged fiscal activism could undermine Treasury’s institutional credibility by deviating from a predictable policy framework.
Capital Economics’ chief markets economist Jonas Goltermann noted that the dollar’s recent decline reflects renewed concerns over U.S. debt sustainability. "While we continue to think such concerns are somewhat overblown, the economic backdrop overall points to a stronger dollar over the coming months. However, continued surprises from U.S. policymakers may matter more in the near term," Goltermann said.
Geopolitical tensions added to market unease after U.S. Treasury Secretary Scott Bessent pledged to impose "the toughest sanctions in history" on Iran, escalating economic pressure in the region.
