TOKYO - The tone in global stocks turned weaker on Friday as Asian shares tracked overnight losses on Wall Street, even as bond yields slid amid a revival in bets that the Federal Reserve will cut interest rates in June.
Japanese equities were standout underperformers, with the Nikkei on course for its worst week in three months, buckling under the weight of a resurgent yen amid rising bets for a Bank of Japan rate hike next week.
Japan's Nikkei slumped 1.1 percent. MSCI's world index edged down 0.05 percent. Its broadest index of Asia-Pacific shares lost 0.4 percent.
Meanwhile, US S&P 500 futures pointed 0.1 percent higher after the cash index closed down 0.2 percent overnight. Those small declines came after a 1.8 percent jump on Wednesday - the biggest daily percentage gain since the post-election rally on Nov 6 - fueled by strong bank earnings at the start of the new reporting season.
The end of the week is likely to be a cautious one though, ahead of Donald Trump's inauguration as US President on Monday, which is also a market holiday for Martin Luther King Jr Day.
"Investors are enjoying the re-anchoring of the market narrative to company fundamentals and away from the macro, with earnings season so far proving robust," said Kyle Rodda, senior financial market analyst at Capital.com.
At the same time, declines in the dollar and bond yields come as "fears of sticky or re-accelerating inflation and a prolonged pause or an end to the Fed's cutting cycle eased," he said.
Ten-year US Treasury yields stood at 4.6125 percent in the latest session, after sliding to the lowest since Jan 6 at 4.5880 percent on Thursday, when Fed Governor Christopher Waller said three or four interest cuts this year are still possible if US economic data weakens.
Traders now see the Fed's June meeting as a likely time for another quarter-point rate reduction.
Ten-year Japanese government bond yields eased along with overnight moves in Treasuries, even as comments from BOJ Governor Kazuo Ueda and one of his deputies, Ryozo Himino, this week spurred a rise in bets for a quarter-point hike on Jan 24 to 79 percent.
The yen pushed to a fresh one-month high of 154.98 per dollar on Friday, with the US currency also sagging on the prospect of earlier Fed cuts.
The dollar index - which measures the greenback against a basket of six major currencies, including the yen - edged down 0.06 percent to 108.90.
The euro was little changed at $1.0308, while the beleaguered sterling was flat at $1.2237.
Declines in bond yields supported alternative assets.
Bitcoin edged as high as $101,769.43 for the first time since Jan 7.
Gold stood at $2,714, hovering close to Thursday's high of $2,724.55, its strongest level in more than a month.
Fed rate cut speculation also buoyed crude oil.
Brent crude futures rose 13 cents, or 0.2 percent, to $81.42 per barrel, after declining 0.9 percent in the previous session. US West Texas Intermediate crude futures CLc1 were up 27 cents, or 0.3 percent, to $78.95 a barrel, following a 1.7 percent drop.
