Investor sentiment was fragile on Friday following a turbulent week besieged by confusion over U.S. trade policy and a global rise in borrowing costs, as stocks and risk currencies fell, though a steep selloff in bonds abated.
Focus for financial markets later in the day will be on the U.S. nonfarm payrolls report, followed by a speech from Federal Reserve Chair Jerome Powell, which could provide more clarity on the outlook for rates in the world's biggest economy.
Overnight the Nasdaq (.IXIC) confirmed it has been in a correction since peaking last December, as Wall Street faces headwinds from a darkening outlook for U.S. growth and uncertainty over President Donald Trump's tariff policies.
U.S. stock futures regained some lost ground on Friday, with Nasdaq futures rising 0.24% and S&P 500 futures tacking on 0.11%.
But European futures tumbled, with EUROSTOXX 50 futures sliding 0.94%. DAX futures sank 1.2%, while FTSE futures lost 0.5%.
Japan's Nikkei (.N225) similarly fell to a six-month low, while MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) shed 0.75%.
"The rapidly shifting sands of U.S. tariffs are turning into quicksand for businesses in the U.S., Canada and Mexico to drown in," said Tony Sycamore, a market analyst at IG.
"I'm not particularly confident at this point in time committing money to the market because there is just so much uncertainty out there. It's a horrible, horrible backdrop for investors to be operating in."
Trump on Thursday suspended tariffs of 25% he had imposed this week on most goods from Canada and Mexico, the latest twist in a fluctuating trade policy that has whipsawed markets.
That dented risk sentiment on Friday and saw investors also sell risk currencies such as the Australian dollar , which fell 0.5% to $0.62995.
The yen meanwhile rose more than 0.3% to 147.47 on the dollar owing to safe haven bids as did the Swiss franc , which struck a three-month top of 0.88125 per dollar.
Gold similarly got a lift from all the uncertainty and hovered near a record high at $2,913.63 an ounce .
In China, stocks fell in line with their regional peers, with the CSI300 blue-chip index (.CSI300) down 0.53%. The Shanghai Composite Index (.SSEC) shed 0.46%.
Data on Friday showed China's imports unexpectedly shrank over the January-February period, while exports lost momentum, as escalating tariff pressures from the United States cast a shadow over the recovery in the world's second-largest economy.
"This slowdown comes before any substantial hit from tariffs, which will almost certainly lead to sharp falls in shipments to the U.S. before long," said Julian Evans-Pritchard, head of China economics at Capital Economics.
"Even more concerning is the contraction in imports, which adds to wider signs that last quarter's stimulus-led pick-up in domestic demand has already partially reversed."
Hong Kong's Hang Seng Index (.HSI) scaled a three-year top before reversing some of those gains to last trade 0.7% lower, as investors' enthusiasm towards artificial intelligence continued to fuel the market.
BOND SELLOFF EASES
A sharp selloff in European bond markets triggered by Germany's plans for a huge spending package showed some signs of tapering on Friday, with bund futures jumping more than 0.8% and French OAT futures up more than 0.7%. Bond yields move inversely to prices.
In Japan, government bonds extended their selloff, though to a smaller degree than in the previous session.
The 10-year Japanese government bond (JGB) yield rose 1.5 basis points to 1.53%, its highest level since June 2009, while the 20-year yield added 2 bps to a more than 16-year high of 2.22%.
The surge in European borrowing costs this week has in turn sent the euro on a tear, with the common currency headed for its largest weekly gain since 2009 at 4.3%. It last traded 0.35% higher at $1.0823.
The European Central Bank (ECB) on Thursday cut interest rates again but warned of "phenomenal uncertainty", including the risk that trade wars and more defence spending could fuel inflation, raising the prospect of a pause in its policy easing next month.
"The ECB finds itself in a challenging position between the threat of U.S. tariffs in the near-term that could warrant further policy rate cuts - and a move into stimulative territory - and the growing commitment to higher defence spending over the next several years," said Mark Wall, chief European economist at Deutsche Bank.
"This environment requires a deft hand on the monetary policy lever and the preservation of policy optionality."
In commodities, Brent futures rose 0.1% to $69.53 a barrel, while U.S. West Texas Intermediate crude futures ticked up 0.03% to $66.38 per barrel.
