Shares in China and Australia fell while benchmarks in Japan whipsawed. South Korea’s tech-reliant Kospi Index pulled back after getting close to a bull market. That tracked Thursday’s decline in the Nasdaq 100. Futures for US equity benchmarks were largely flat. 

The dollar advanced against most of its G10 peers, with a gauge of its strength set for its first weekly gain in six weeks. The yen outperformed as well as rising geopolitical tension spurred traders to buy the haven currency ahead of the weekend.  

US President Joe Biden aims to sign an executive order in the coming weeks that will limit investment in key parts of China’s economy by American businesses, people familiar with the internal deliberations said. 

“It’s just the next step in a long line of such restrictions that adds to underlying tension between the US and China, raises the cost of trade and moves the world further away from peak globalisation,” said Sean Callow, a   senior currency strategist at Westpac Banking Corp.

Still, equity investors largely shrugged off the impact of Biden’s intended measures, with analysts saying that investors are braced for a decoupling between the two economies.  

“I don’t think the US-China tensions are something new to the market but clearly that will continue to be an overhang to equity market investors,” Kinger Lau, chief China equity strategist for Goldman Sachs Group said in an interview with Bloomberg Television. “We remain overweight A-shares in our regional allocation framework,” Lau said, referring to onshore stock in China.  

In the US, recurring unemployment benefit claims jumped to the highest level since November 2021, adding to signs that the labour market is beginning to lose momentum. Sales of previously-owned homes fell in March by more than forecast, underscoring a housing market that’s still on shaky footing despite some signs of stabilising. US mortgage rates rose for the first time since early March.

The data led traders to pare back bets on more Federal Reserve rate hikes. The policy-sensitive two-year Treasury yield was steady at 4.13% after declining 10 basis points on Thursday.

Fed Bank of Cleveland president Loretta Mester signalled support for another rate hike to quell inflation while flagging the need to watch recent bank stress that could crimp credit and dampen the economy. Her Dallas counterpart Lorie Logan said inflation has been “much too high”, while outlining measures to watch.

“If the Fed stays the course, broad financial conditions should continue to tighten, the economy should decelerate into recession, and stocks should trade down sharply,” wrote Chris Senyek of Wolfe Research. “On the flip side, the biggest upside risk to our bearish call remains the Fed backing off way too soon. Although, if the Fed fails to sustainably bring down inflation, the ultimate pain will likely be much worse 12-24 months down the road.”

Despite the equity market declines there were bright spots. Shares in Rakuten Bank jumped by a third in its debut in Tokyo in the biggest initial public offering in Japan since 2018. 

In China, Contemporary Amperex Technology shares rallied after the battery maker’s revenues surged in the first quarter.

In other markets, oil fell further after dropping by the most in more than a month on Thursday, wiping out almost all of the gains stemming from OPEC+’s surprise output cut on signs of a global economic slowdown. Gold was little changed around the $2,000 an ounce mark.