Asian shares gained on Friday ahead of US jobs data that will give another clue to the health of the world's largest economy as warning signs flashed in bond markets, and oil traded around its lowest level since the start of the war in Ukraine.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.74 per cent, boosted by index heavyweight TSMC , which jumped 3.2 per cent, regaining ground it had lost earlier in the week due to tensions surrounding US House of Representatives Speaker Nancy Pelosi's visit to Taiwan.
This left the regional index set to finish a third straight week in positive territory, while Japan's Nikkei gained 0.83 per cent. EUROSTOXX 50 futures and S&P 500 futures both gained 0.2 per cent.
But the day's main event, US employment data, is yet to come, with investors waiting to see whether the US Federal Reserve's aggressive pace of rate hikes is starting to cause economic growth to slow.
Nonfarm payrolls are expected to increase by 250,000 jobs last month, after rising by 372,000 jobs in June.
Last week, shares and US treasuries rose as markets decided the Fed might raise rates less aggressively due to fears about a recession and hopes of slowing inflation, though many Fed policy makers have pushed back on such suggestions this week.
"We're waiting to see a slowdown in the labour market, so if we get a large miss, it will finally confirm the labour market is slowing, and we'll see some more rallies in US treasuries," said Prashant Bhayani, chief investment officer for Asia at BNP Paribas Wealth Management.
Other asset classes are already reflecting a slowdown.
"The bond market is saying there is a pretty high chance of recession, while the equity market is focused on the labour data, said Bhayani.
The closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes reached 39.2 basis points overnight, the deepest inversion since 2000.
An inverted curve is often viewed as portending a recession.
On Friday morning, 10-year yield was 2.6936 per cent and the two-year yield was 3.0531 per cent, leaving the gap between them at a still large 36 basis points.
In another sign that growth could be slowing, oil closed overnight at its lowest levels since February, before the war in Ukraine.
"Crude oil fell sharply as recessionary fears drove concerns of weaker demand," said analysts at ANZ, with declines also partly due to data on Wednesday showing surge in US inventories last week.
Prices recovered a touch in Asia trade on Friday, Benchmark Brent crude futures were up 0.5 per cent $94.61 a barrel and US crude futures were 0.7 per cent higher at $89.12 a barrel.
In currency markets the dollar index, which measures the greenback against six major peers, was at 105.93, up a fraction having fallen 0.6 per cent overnight alongside falling US yields.
Sterling was down a whisker against the dollar at $1.2142 after taking a spin overnight as the Bank of England raised interested rates and warned a long recession was approaching Britain.
Spot gold was steady at $1,790 an ounce.
