Treasuries climb with yen as Fed concern drives haven demand Sri Lanka is latest developing economy to let currency weaken Investors cut holdings in riskier assets, seeking shelter before U.S. payrolls data that may bolster the case for the Federal Reserve to raise interest rates. Stocks fell for the first time in three days in Europe and shares in Asia extended a seventh weekly decline as equities in Hong Kong resumed losses. South Africa’s rand and Russia’s ruble led a gauge of emerging-market currencies to a record low, while demand for havens boosted government bonds and left the yen on course for its best week this year. “Markets are very nervous about the prospects for the world economy and what a Fed rate hike will mean in this context,� said William Hobbs, head of investment strategy at Barclays Plc’s wealth-management unit in London. “Will the U.S. help paper over some of the cracks we’re getting from emerging markets? The U.S. still sets the beat, but it’s incapable of feeding global growth on its own.� Concern a slowdown in China was damping the outlook for global growth roiled markets worldwide in the past month, sending global stocks to their biggest monthly loss in three years and commodities to a 16-year low. While investors have pared bets on a September liftoff to 26 percent amid the turmoil, that increases the risk of a exaggerated reaction should the jobs data give the Fed a green light to raise rates. Stocks The Stoxx Europe 600 Index dropped 2.1 percent at 6:40 a.m. in New York. A report on Friday showed German factory orders tumbled more than analysts anticipated in July and June’s reading was revised lower. The European Central Bank downgraded its growth forecasts for the euro area on Thursday, with President Mario Draghi citing a slowdown in emerging-market economies and signaling policy makers may expand stimulus. Germany’s DAX Index dropped 2.2 percent on Friday, sending its 50-day moving average below the mean for the last 200 days, a chart pattern known as a death cross. Bayer AG declined 3.1 percent after saying it will list its plastics and polymers unit, Covestro. Standard & Poor’s 500 Index E-mini futures expiring this month lost 1.1 percent after the gauge ended little changed on Thursday, trimming an advance of as much as 1.3 percent. “There is some hesitance ahead of the payrolls data,� said Espen Furnes, who helps oversee $85 billion at Storebrand Asset Management in Oslo. “These days, where investors are trying to grasp the influence and magnitude of a slowing Chinese economy, everyone is following the U.S. economy even closer as this is the main driver in the global economy going forward.� Nonfarm-payrolls on Friday may signal the world’s largest economy is gathering strength, supporting the debate for the first interest-rate increase since 2006. Employers added 217,000 workers in August, staying above 200,000 for a fourth month and up from 215,000 in July, according to the median of 97 estimates in a Bloomberg survey of economists. The unemployment rate probably fell to 5.2 percent from 5.3 percent. (For more news on stocks, see TOP STK.) Emerging Markets The MSCI Emerging Markets Index fell 1 percent, extending its weekly loss to 3.3 percent, as equity benchmarks in Hong Kong, India, South Korea, Hungary and Taiwan slid more than 1 percent. While mainland Chinese markets remained closed for two-day holiday, trading resumed in Hong Kong with the Hang Seng China Enterprises Index sinking to a two-year low amid speculation the government will pare back support for the market following this week’s military parade. The gauge of mainland companies trading in the city fell 1.4 percent, bringing this year’s decline to 23 percent, the worst-performing index worldwide after Peru. MSCI’s emerging-market index has fallen 11 percent since China devalued the yuan on Aug. 11, with the average price-to-earnings ratio for the next 12 months at 10.4 times, a 31 percent discount to the MSCI World Index of developed countries. (For more news on emerging markets see TOP EM.) Currencies Russia’s ruble, South Africa’s rand and the Turkish lira weakened at least 0.5 percent against the dollar. Sri Lanka’s rupee fell 2.2 percent. The country joined Kazakhstan in allowing the market play a greater role in determining the exchange rate following China’s devaluation. The central bank will not give a daily rate of intervention from Friday, Deputy Governor Nandalal Weerasinghe said. The Aussie declined as much as 0.8 percent to 69.59 U.S. cents, its weakest level since April 2009, as commodities slid. The yen, regarded as a haven in times of volatility, added 0.8 percent to 119.11 per dollar. It has climbed 2.2 percent versus the U.S. currency this week, the best performance among 16 major peers. (For more news on currencies, see TOP FX.) Bonds The gains in Treasury 10-year notes sent yields four basis points lower to 2.12 percent, reaching the least since Aug. 26. Investors have cut the implied probability of a rate increase in September from 38 percent at the end of last week, according to data compiled by Bloomberg. The figures are based on the assumption that the benchmark rate will average 0.375 percent after the first hike. Germany’s 10-year bunds rose for a fourth day, pushing the yield four basis points lower to 0.68 percent. Britain’s 10-year gilt yield dropped six basis points to 1.85 percent. The cost of insuring investment-grade corporate debt rose for the first time in three days. The Markit iTraxx Europe Index, which tracks credit-default swaps on investment-grade companies, climbed one basis point to 73 basis points. A measure of non-investment grade corporate CDS rose four basis points to 335 basis points. (For more news on bonds, see TOP BON.) Commodities The Bloomberg Commodity Index dropped 0.3 percent, and is heading for its eighth decline in nine weeks. West Texas Intermediate crude oil slid 0.6 percent to $46.49 a barrel, while Brent retreated 0.3 percent to $50.54 in London. Copper fell 1.5 percent after rising to a three-week high in London on Thursday. The metal is up 0.6 percent this week.

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