There was focus too on the first anniversary of Russia’s invasion of Ukraine, which Moscow terms a “special military operation,” as calls for peace, but also warnings about a wider escalation, came from both Washington and Beijing.

Europe’s markets couldn’t maintain what had been a positive start with the pan region Euro Stoxx 600 dipping 0.1 percent, Wall Street futures pointing to a red start there later and MSCI’s main worldwide index down 0.2 percent for the day and 1.7 percent for the week.

Europe’s moves were partly offset by a pause in this month’s sharp rise in global borrowing costs — a reversal of January’s trend.

Overnight, Kazuo Ueda, who will take over as governor of the Bank of Japan in April, had told a confirmation hearing that ultra-low interest rates were still needed to support Japan’s fragile economy, warning of the dangers of responding to cost-driven inflation with monetary tightening.

Europe’s benchmark bond yields dipped back from 2011 highs as Germany, the bloc’s industrial power-house said its economy shrank by slightly more than initially predicted in the fourth quarter of 2022.

The dollar was higher again too ahead of US personal consumption expenditures price index data for January, the Federal Reserve’s preferred inflation measure. The index is expected to be up 0.4 percent from a month earlier, compared with 0.3 percent the previous month.

Close Brothers Asset Management’s Chief Investment Officer, Robert Alster, said markets were upbeat about the strength of consumer spending in many of the major economies at the moment but also wary about inflation staying higher for longer and extending the rise in interest rates.

“That is why were are all hanging on each data point,” Alster said. “There is a feeling it is going to be volatile, a bit like being cautiously optimistic skating on thin ice” he added. “We are virtually neutral now on all asset classes.”

Unwelcome Anniversary

Wall Street was pointing lower again having ended a topsy-turvy Thursday in positive territory for the first time in five sessions, although it too remains on course for its worst week of the year.

The expectations that US interest rates might need to rise for longer meant the dollar index, which measures the top world currency against six of its main peers, was up 0.25 percent at a seven-week high of 104.859. On Thursday, an unexpected fall in new claims for unemployment and a revised uptick in the fourth-quarter PCE price index, suggested some lasting strength in the world’s largest economy.

“The US dollar index should extend its rise toward 106 if today’s US PCE deflators lift the US Treasury 2Y yield above the 4.5-4.75 percent Fed Funds Rate range,” said analysts at DBS Bank.

A year on from Russia sending its troops into Ukraine, the focus remained the loss of life and long-term geopolitical implications, although the spillovers of the war have had a major impact on financial markets.

Aaron Dunn, co-head of value equity at Eaton Vance, said the most obvious had been the sharp increase in oil and gas and agricultural prices when the war broke out. Notably though, most of those moves have been completely reversed.

“You have basically retracted a fair amount of the gains in most of the energy markets in the back half of 2022,” Dunn said, highlighting that the slump in natural gas prices following a mild winter meant gas use was now replacing coal again in Europe.

“That has helped the global economic picture,” he explained. “The big question is now the top line, the economic performance, and in that respect China’s reopening will play an outsized role in the direction we go from here.”

The overnight comments from BOJ head-elect Ueda on Japan’s easy-money policy had seen Japan’s Nikkei share index close up 1.3 percent, while its five-year government bond yield eased to 0.235 percent.

Ten-year Japanese bonds didn’t trade on Friday due to thin liquidly, after breaching the upper limit of the BOJ’s policy cap for two straight days. But the yen turned choppy as data also showed core consumer inflation hitting a 41-year high, keeping pressure on the BOJ to phase out its stimulus program.

Meantime, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.3 percent, for a hefty weekly drop of 2.5 percent.

In particular, Chinese blue chips tumbled 1 percent and Hong Kong’s Hang Seng Index dropped 1.6 percent after comments from US officials that Washington would increase the number of troops helping train Taiwan’s forces.

In the bond markets, the key Treasury yield, or the cost for the US government to borrow in the international debt markets, eased to as far as 3.8590 percent before climbing back to 3.9101 percent.

Benchmark European yields flip-flopped too, dipping after Germany, the bloc’s industrial power-house, said its economy shrank by slightly more than initially predicted in the fourth quarter of 2022.

They popped up again ahead of US trading though with Germany’s 10-year government bond yield last up at 2.49 percent having hit a 2011 high earlier in the week after stronger-than-expected euro zone PMI data.

In the oil market, Brent crude futures rose 0.8 percent to $82.84 while US West Texas Intermediate crude was also up 0.8 percent at $75.99.

Gold was fractionally higher at a spot price of $1,824.89 per ounce although it was on course for a fourth straight weekly drop.