Japan's household spending posted a surprise drop in May, falling for the third consecutive month as the global chip shortage hurt car sales in a worrying sign for the outlook of the world's third-largest economy.

Asian shares tracked overnight Wall Street gains in early trading on Friday as fears of an economic slowdown cooled and sterling began to claw back recent losses following British Prime Minister Boris Johnson's decision to resign.

The U.S. trade deficit narrowed in May as slowing domestic demand amid rising interest rates curbed imports, which could see trade contributing to economic growth in the second quarter after being a drag for nearly two years.

The number of Americans filing new claims for unemployment benefits unexpectedly rose last week and there are growing signs that demand for labor is cooling, with layoffs surging to a 16-month high in June as the Federal Reserve's aggressive monetary policy tightening stokes recession fears.

A closely watched gauge of the U.S. service sector fell to its lowest in 20 months in June, but held up better than expected despite ongoing pressures from high costs for labor and other inputs.

U.S. job openings fell less than expected in May, pointing to a still tight labor market that could keep the Federal Reserve on an aggressive monetary policy path as it battles high inflation.