By Alun John

HONG KONG (Reuters] – Asian shares fell and U.S. stocks futures dropped on Friday. The weakness in Asian shares and U.S. stocks was due to Amazon’s (NASDAQ:) quarterly earnings. This missed a significant trend, and continued inflation and growth fears.

Investors in the bond and currency markets are particularly concerned about central bank responses to inflation.

MSCI’s Asia-Pacific share index outside Japan fell 0.3% during early trading. The weekly loss was 1.3%. The trade ended flat following an early loss.

Asian shares suffered from a drop in Nasdaq Futures which fell 0.73%. After the close, results that were below expectations by Amazon Inc and Apple Inc (NASDAQ) made it difficult for Asian share investors.

lost 0.4%.

“The background noise hasn’t changed over the last weeks. People still worry about stagflation slowing growth numbers rising inflation and but that’s been priced more on the bond market than in the equity market right currently,” Kerry Craig (NYSE:) Asset Management, said.

Craig explained that equity markets have been kept afloat by strong earnings and stable profit outlooks. Inflation is much more of a concern for bond investors rather than equity investors. You’re also not getting clear messages from central banks around the globe.

Chinese shares were less volatile than the rest of the markets. The local blue chip index was flat. But, Hong Kong’s benchmark fell 0.83%. This is due again to China’s property stocks.

China Evergrande Group shares rose 1.2% after news broke that the cash-strapped Chinese developer made payments to an offshore bond coupon before Friday’s end of a grace period. This was in order to meet its second dollar-bond payment obligation for this month.

Overnight, the closing records of the Nasdaq and Nasdaq were broken. The close was just shy its highest point. [.N]

CENTRAL BRANKS

The central banks will continue to focus on their rate policy as inflation worries grow.

After the Reserve Bank of Australia on Friday refused to buy bonds to support its 0.1% target, speculation is growing that the Reserve Bank of Australia may not be able keep its 1.1% cash rate unchanged until 2024.

The RBA is pursuing this target as a central part of its case. Bonds have been selling off rapidly due to uncertainty about their prospects.

Three-year bond yields have risen 33 basis points to 1.08% in the last week. This is their largest increase since 2009. One month ago, they traded at 0.30%.

Eurozone bond yields spiked on Thursday as Christine Lagarde (European Central Bank President) disappointed investors with her inability to calm investor concerns about rising inflation, rate hikes and a soaring economy.

The euro rose as a result. It held at $1.1676 in Asian time on Friday.

“The European Central Bank has finally shifted its official communication on inflation from the broad denial of the summer months towards a much more balanced assessment,” said ING analysts.

All eyes now turn to the Federal Reserve next week, where the policy committee will meet.

Due to losses against the euro the dollar fell, and the was at 93.381. This is just a few hours after it hit its lowest point this month.

Benchmark U.S. 10-year yields were constant at 1.5677%

Due to the Federal Reserve’s increased expectation of an increase in interest rates next year, the gap between 30-year and 5-year yields was 79.5 basis points. It has now narrowed down to as low as 73.4 basis point overnight.

The price of oil was stable at $82.72 per barrel. However, it is on track to make its first weekly decline in eight weeks. [O/R]

The price was flat at $1797 per ounce.