Stocks in Asia struggle for direction on Friday as the dollar strengthens ahead of a key U.S. jobs report and investors brace for a sharper rate hike by the Federal Reserve as new lockdown restrictions in China heighten fears about global growth, writes Reuters.

In the European market, the situation looks better: futures on the Euro Stoxx 50 rose by 1.2%, futures on the German DAX – by 1.3%, and futures on the British FTSE – by 0.75%.

All eyes are now on the US nonfarm payrolls data for August, due out on Friday.

Analysts’ expectations boil down to the fact that 300,000 jobs were created in the US economy last month, while unemployment remained at 3.5%.

However, investors could be disappointed if the data shows a strong enough rate to support a continued sharp Fed rate hike and further strengthen the dollar and trigger a sell-off in bonds.

The futures market is now pricing in a 75% chance of a 75 basis point Fed rate hike at the September meeting instead of a 69% chance the day before.

On Friday, the MSCI Asia Pacific Equity Index outside Japan fell 0.5%, its worst weekly performance since mid-June, falling 3.6% as rising expectations for a hawkish increase in global interest rates hit risky assets.

Japan’s Nikkei fell 0.1%, China’s blue chip index fell 0.5%, Hong Kong’s Hang Seng fell 1.0%, and South Korea’s stock market remained largely unchanged.

China’s southwest metropolis of Chengdu placed 21.2 million people under quarantine on Thursday, while the Shenzhen technology hub also introduced new social distancing rules to combat recurring COVID-19 outbreaks.

Analysts at Nomura say there is growing concern that the hotspots of COVID-19 in China are moving from remote regions and cities to provinces that are of much greater importance to the country’s national economy. “We are of the opinion that China will maintain its zero tolerance policy for COVID-19 until March 2023, when the reshuffle (in the country’s leadership) is fully completed, but now we expect a slower pace of easing this policy after March 2023,” Nomura said.

Materials from Reuters were used in the preparation