Nov 1 (Reuters) - A look at the day ahead in Asian

markets.

Market sentiment in Asia will be fragile at best on Friday as

high and rising bond yields sink their teeth into risky assets,

and worries about escalating AI costs appear to slam the brakes

on the megacap, Big Tech rally.

There probably won't be any positive spillover from Wall

Street after the S&P and Nasdaq on Thursday posted their

steepest one-day losses in two months.

However, shares in Amazon ( AMZN ) and Intel ( INTC ) rose sharply in

after-hours trading following their earnings reports on

Thursday, but Apple shares dipped. Traders will likely play it

safe ahead of U.S. employment data on Friday and ahead of the

weekend.

There's a sprinkling of potentially market-moving events in

Asia on Friday, namely purchasing managers index reports from

several countries including China, Indonesian inflation, and

Japanese earnings from Mitsui ( MITSF ), Nomura, Mitsubishi ( MSBHF ) and others.

Perhaps more importantly though, the so-called 'bond

vigilantes' are flexing their muscles again, pushing up yields

across the developed world - with the possible exception of

Canada - in an attempt to enforce some degree of discipline on

what they consider fiscally lax governments.

A bearish narrative coalescing around three main facets -

fiscal slippage, huge debt supply coming down the pike, and

sticky inflation resulting from higher spending - is dominating

bond market sentiment right now.

Yields are on the rise, with UK gilts feeling the heat most

in the last 24 hours following Chancellor Rachel Reeves' debut

budget on Wednesday. And on Thursday, the Bank of Japan kept

rates on hold but left the door open to a near-term hike.

For markets in Asia, U.S. bonds are what matter most. And

only days away from the U.S. presidential election the signs are

flashing amber, if not red - implied volatility and the 'term

premium' are the highest in a year, and the 10-year yield has

risen more after the first cut in this Fed easing cycle than any

since 1989.

If that wasn't bad enough for Asian markets, the dollar just

clocked its biggest monthly rise in two and a half years. Most

Asian stock markets lost ground in October and the MSCI

Asia/Pacific ex-Japan index fell 4.5%.

Chinese stocks lost more than 3% in October, perhaps

unsurprising given the previous month's 21% rise, while the weak

yen has helped Japan's Nikkei 225 index post a monthly gain of

around 3%.

Given the nervous global backdrop, however, it would not be

a surprise to see Japanese stocks retreat on Friday, regardless

of the exchange rate.

Asia's main data point on Friday is China's 'unofficial'

manufacturing PMI. This follows the Bureau of Statistics PMI

reports on Thursday that showed manufacturing activity crept

back into expansion territory in October for the first time

since April.

Here are key developments that could provide more direction

to markets on Friday:

- Reaction to Apple, Amazon ( AMZN ) results

- China PMI (October)

- Indonesia inflation (October)