Asian stocks opened lower Friday, trimming first-half rally in global equities. Treasury yields steadied following a surge Thursday on bets for further rate hikes that cast a shadow over markets.

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Benchmark indexes declined in Japan, South Korea and Australia, while futures for Hong Kong posted a modest decline.

As the first half draws to a close, Japan’s Topix has ratcheted up a gain of more than 20 percent while Chinese equities are in the red and Australian stocks have eked out a small gain. A gauge of global developed and emerging-markets shares has rallied almost 12 percent so far this year.

US stock futures were little changed after the S&P 500 made a modest advance on Thursday as traders adjusted their positions at the end of the quarter.

A selloff in Treasuries on saw two-year yields jump 15 basis points Thursday as investors moved closer to Fed’s view for tighter monetary policy in the coming months. Swap markets now indicate a nearly 50 percent chance of a second Fed hike by year-end.

Australian and New Zealand sovereign bond yields jumped about seven basis points Friday as the upward pressure on rates flowed through into Asia. Economists expect the Reserve Bank of Australia to hike rates at its meeting next week while traders are positioning for a pause before another move up in August.

A key focus of the Asia day will be purchasing managers’ index data from China, with continued weakness in manufacturing expected amid concern the government isn’t doing enough to stimulate the economy.

The yuan remains under the spotlight after sliding to its lowest level in seven months. It is down almost 5% against the dollar this year, prompting extra scrutiny from Chinese regulators, according to people familiar with the matter.

Inflation in Tokyo re-accelerated for the second time in three months in June, supporting expectations the central bank will raise its prices forecast next month amid lingering speculation of possible policy adjustments. Still, downward pressure remains on the yen, which is hovering near the 145 level versus the dollar given the sharp divergence in policy between the Fed and the Bank of Japan.

Thursday’s readings on US jobless claims and the gross domestic product showed the US economy is in better shape than many had envisioned at the start of 2023. While key gauges of inflation closely watched by the Fed have been revised down slightly, they still remain well above the central bank’s 2 percent target.

After Thursday’s data came out, the US curve inversion intensified — with longer-dated yields rising less than shorter-maturity ones. That means the economy may look stronger now, but investors expect the Fed’s rate increases to curb future growth, which could boost the risk of a recession down the road.

“Rate hiking works on a lagging basis. It tends to start to really erode consumerism 14 to 16 months in and we’re in month 15,” Frances Stacy, director of strategy at Optimal Capital Advisors, said on Bloomberg Television. “The Fed is going to stamp on growth and they’re going to stamp on growth to quell inflation until something in the system breaks where they can no longer justify stamping on growth.”

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