Global shares have retreated as geopolitical tension kept crude oil above $US90 a barrel before US payroll numbers, and hawkish central bankers raised doubts about the pace and timing of interest rate cuts.

The threat of supply disruptions from prolonged conflict in the Middle East kept Brent oil futures above $US90 a barrel, a level not seen since last October, with prices heading for their second weekly gain.

The dollar firmed against peer currencies after rebounding from a two-week low, while gold’s rally to record highs on Thursday came to a halt before the US payroll numbers.

The MSCI All Country stock index was down 0.3 per cent at 770.7 points on Friday as it continues to ease in the first week of the quarter after hitting a lifetime high at 785.62 points on March 21.

In Europe, the STOXX index of 600 companies dropped 1.2 per cent to 504.7 points after Tuesday’s lifetime high of 515.77 points.

A cooling US services sector and comments this week from Fed chair Jerome Powell reinforced the view that rate cuts were likely to begin at some point in 2024.

However, some other Fed officials have taken a more conservative view, with Minneapolis Fed president Neel Kashkari, in particular, striking a more hawkish stance overnight, saying rate cuts might not be required in 2024 if inflation continues to stall.

“It’s the first time I’ve heard those kind of statements, so the markets sold off, and at the same time we had a flare-up in geopolitical tensions in the Middle East,” said Mark Ellis, CEO of Nutshell Asset Management.

US non-farm payroll numbers for March are due before Wall Street opens, with economists expecting a rise of 200,000, compared with 275,000 in February, while the unemployment rate is likely to keep steady at 3.9 per cent.

US stock index futures were trading firmer, recovering some ground after the three key indices fell more than one per cent each on Thursday on hawkish Fed comments and Middle East tension.

Markets digested news that Israel braced for a possible retaliatory attack after its suspected killing of Iranian generals in Damascus.

In a later call with Israeli Prime Minister Benjamin Netanyahu, US President Joe Biden threatened to condition support for Israel’s offensive in Gaza on it taking steps to protect aid workers and civilians.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.45 per cent, tracking a late tumble on Wall Street as risk aversion dominated the market mood. The index was set to end the week little changed.

A holiday in China also made for thinner trade.

Tokyo’s Nikkei fell two per cent, pressured in part by a stronger yen, thanks to the prospect of further rate hikes there and more jawboning from Japanese officials.

Hong Kong’s Hang Seng Index edged down 0.6 per cent.

Fed officials’ comments supported the dollar against a basket of currencies, lifting it away from a two-week low hit after a downbeat US services survey.

The euro was steady and the yen rose to a two-week high.

US Treasuries struggled, with the 10-year yield hovering near its highest in more than three months, last at 4.321 per cent.

The two-year yield firmed at 4.6520 per cent.

In commodities, Brent edged up to $US90.78 a barrel, after striking a more than five-month high on Thursday.

US crude eased a touch to $US86.51 a barrel.

Gold retreated from a record high and was last slightly lower at $US2,288 an ounce.

This post was originally published on Michael West.