Asian stocks extend losses as investors remain jittery ahead of US employment report

Equity markets fell across the board in Asia, as the prospect of an imminent rate hike by the US Federal Reserve weighed on sentiment.

With Chinese mainland markets closed for the second consecutive day for a national holiday, investors were spared the volatility that has gripped the region’s markets in recent weeks but there were losses elsewhere.

“Despite the absence of China from the market landscape for the past two days, its presence was still felt […] ahead of next Monday, which could bring with it a Chinese market lacking the price-lifting last-minute support its government had been providing in the run up to the end of week military parades,” said Spreadex’s Connor Campbell.

Hong Kong’s Hang Seng Index and Japan’s Nikkei Stock Average both reversed earlier gains to close down 0.45% and 2.15% respectively.

The Hang Seng has lost 3.8% this week, its seventh weekly decline in a row, while Japanese equities dropped 7% this week, marking their fourth straight week of losses and the biggest weekly decline since April last year.

The fall in Japanese stocks comes after foreign investors sold a net 1.47trn yen (£7.9bn) of Japanese stocks and futures contracts for the Nikkei and Topix, the biggest combined selling in eight years.

The yen, considered to be a safe haven asset during market volatility, hit a four-month high against the euro, after the European currency fell heavily on the back of the European Central Bank’s comments on Thursday.

Mario Draghi, the ECB president, hinted the central bank might extend its quantitative easing programme beyond September.

As a result, the euro suffered sharp losses, losing 0.68% against the yen, while the Japanese currency also gained 0.80% and 0.97% against the dollar and the pound respectively.

Elsewhere, South Korea’s Kospi lost 1.54%, while Australia’s ASX climbed 0.25%, boosted by a positive session for mining stocks, with Rio Tinto reiterating it remained upbeat about China.

Investors’ attention will now shift across the Pacific, with Friday’s employment report expected to shed light over the timing of the first interest rates hike.

“Today’s job figures are unlikely to be able to confirm a September start date but they do have the ability to write off September and leave December as the only candidate for a 2015 hike,” said Alastair McCaig, market analyst at IG.