A searing sell-off rocked Asian shares and emerging market currencies on Friday as investors feared higher US interest rates under incoming President Donald Trump will spark capital outflows from the region.
European shares are expected to open slightly higher after moderate losses in the previous session, with spread-betters seeing major European indexes, such as Britain's FTSE. FTSE and Germany's DAX. GDAXI, rising 0.1 to 0.4%.
MSCI's broadest index of Asia-Pacific shares outside Japan MIAPJ0000PUS fell 1.4% as US bond yields continued to soar on views that Trump's spending plans will push up inflation, possibly triggering more aggressive rate hikes by the Federal Reserve.
Emerging markets bore the brunt of selling, with MSCI emerging market MSCIEF index falling 1.5% to its lowest level since July, with Indonesia and Malaysia hit the hardest in Asia.
Indonesian shares JKSE slumped 3% while the rupiah currency IDR= had fallen more than 2.5% to 4-1/2-month lows before it stabilized on the Indonesian central bank's intervention.
The Malaysian Ringgit MYR= also dropped 1% to 9 1/2-month lows.
Japan's Nikkei N225 bucked the trend, rising more than 1% to 6-1/2-month highs the yen weakened against the firming dollar.
On Wall Street, the US S&P 500 Index SPX rose 0.2% while the Dow Jones industrial average DJI jumped 1.2%, smashing through its previous record high set in August by almost 1%.
In contrast, the technology-heavy Nasdaq fell 0.8% IXIC, with Apple APPL.O dropping 2.8%, hit by fears that Trump's immigration policy could prevent Silicon Valley from attracting talent from around the world as it does now.
"The market's focus has shifted to Trump's policy after the initial knee-jerk risk-off reaction. The markets think he is likely to protect the US domestic economy, especially the old economy," said Koichi Yoshikawa, executive director of financial markets at Standard Chartered Bank.
"That explains why the Dow was up and the Nasdaq was weak," he added.
The financial sector SPSY surged 3.7% to its highest since the 2008 global financial crisis, as Trump has sided with leading conservatives in calling for the repeal of the 2010 Dodd-Frank Financial Reform Act largely opposed by banks.
US bond markets have also seen dramatic moves since Trump's victory, with the 10-year US Treasury yield hitting their highest levels in 10 months.
Expectations that his policy stance - from protectionism and fiscal expansion - will boost inflation have been driving the surge in US yields.
"You have fiscal policy that will widen the deficit by trillions of dollars in a decade, and if there is a 20% tariff on imports from China, that alone would boost inflation by one percentage point," said Tomoaki Shishido, fixed income analyst at Nomura Securities.
The 10-year US yield US10YT=RR rose to 2.15%, almost 30 basis points, or 0.30 percentage point, above its levels around 1.86% just before the US election on Tuesday.
Inflation expectations measured by US inflation-linked bonds US10YTIP=RR rose to 1.87%, its highest since July last year, up from low below 1.2% touched in February.
The 30-year yield US30YT=RR rose 38 basis points, posting its biggest weekly jump since 2009 before a US market holiday on Friday.
Soaring US yields have been a boon to dollar bulls. The Euro dipped to $1.0908 EUR=, compared to $1.1025 before the US elections.
The dollar strengthened sharply against the yen, which has traditionally a strong inverse correlation with US yields because higher US yields encourage Japanese investors to buy more US debt.
The dollar rose to as high as 106.95 yen JPY=, its highest since late July, compared to around 105.15 yen before the elections. It eased back to 106.38 yen on Friday.
Emerging market currencies were hammered by concerns investors could pull back their funds out of higher-yielding emerging assets and move them back to the U.S.
Apart from the Indonesian Rupiah, the Mexico peso has fallen 7.5 percent so far this week, hit by Trump's threat to scrap the country's key free trade agreement with the United States and build a massive wall along the border.
The Brazilian real BRL= shed 5% on Thursday to a five-month low, while its benchmark Bovespa BVSP stock index slumped 3.3%.
The South Korean won KRW= fell to its lowest level in more than four months on the dollar's strength and concerns about Trump's foreign policy and his commitment to security in East Asia.
Markets are expecting the US Federal Reserve to go ahead with a rate hike in December after US markets quickly stabilized from the initial Trump election shock.
The money market futures FFZ6 FFF7 are pricing in about 75% chance of a rate hike.
In a remarkable shift of sentiment, the market is also now starting to price in a chance of a rate hike by the European Central Bank for the first time since 2011.
Debt yields are rising in Europe as well, with 10-year German Bunds yield hitting an eight-month high of 0.32% DE10YT=RR.
The 10-year yield in Italy, rocked by concerns Prime Minister Matteo Renzi may resign if he loses the Dec 4 referendum on constitutional reform he pushed for, shot up to 1.95% IT10YT=RR, its highest level in 14 months.
Elsewhere, oil prices eased as the market looked to whether OPEC will decide later this month to cut production to address long-running over supply concerns.
US crude futures CLc1 fell 0.4% to $44.48 per barrel.