Global Stocks Hit by Sliding Commodities Prices -- Update

By Kenan Machado and Jon Sindreu Features Dow Jones Newswires

A fall in commodity prices dented investors' appetite for risk and dragged down global stocks Friday.

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The Stoxx Europe 600 was down 0.1% in the European morning, following declines in all the main Asian bourses. Futures pointed to a flat opening for the S&P 500 ahead of a key jobs report.

The price of crude rebounded during the trading day after sharp overnight falls. Brent crude futures were up 0.6% to $48.65 a barrel, while WTI futures were mostly unchanged at $45.53 a barrel. This provided a lifeline to stocks in the oil and gas sectors, which rose 0.2% after steep losses when the market opened.

Nevertheless, U.S. crude prices are still down more than 7% from a week ago, hitting their lowest since November, when the Organization of the Petroleum Exporting Countries agreed to cut output for six months. This caps a bad week for commodities and damped investors' hunger to take on risk.

"There are a lot of concerns out there on [oil] oversupply," said Andrew Sullivan, managing director of sales trading at Haitong International Securities, noting the risk that lower oil and energy consumption could indicate slack demand, threatening the global economic recovery.

Hong Kong's Hang Seng and the Shanghai Composite Index both closed down 0.8%. Australia's S&P/ASX 200 lost 0.7%. Markets in Japan and South Korea were closed for holidays.

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Nevertheless, major stock indexes in the U.S. and Europe have climbed over the last few weeks, on positive corporate earnings. Investors are also confident that companies in the energy sector are now more resistant to falls in the price of crude.

"The amount of investment that has gone on in the last several years into production efficiency" makes these companies attractive, said Rob Bartenstein, chief executive of Kestra Private Wealth Services, who owns stocks in oil giants Exxon Mobil Corp. and Royal Dutch Shell PLC.

Britain's FTSE 100 gained 0.2% Friday, benefiting from the session's main risers. Shares in Pearson PLC went up 11% after the world's largest education company announced a review of its struggling U.S. products. Marks & Spencer Group PLC and International Consolidated Airlines Group SA-- owner of British Airways and Iberia--both gained roughly 5% after M&S announced the appointment of a new non-executive chairman and IAG reported better-than-expected first-quarter figures.

Still, metals have been battered throughout the week, on fears that China's crackdown on speculation and borrowing could hurt metals demand. Iron ore traded on the Dalian Commodity Exchange closed down 8%, the daily trading limit. Nickel fell to its lowest level in nearly a year in London, while copper tumbled in the U.S.

"Financial market regulatory scrutiny certainly appears to be driving liquidation across a range of asset classes onshore," said Bill Bowler, a Chinese equities trader at Forsyth Barr in Asia.

Later in the day, investors will focus on U.S. employment figures for April, which analysts expect to show a strengthening labor market. This week, the Federal Reserve brushed off concerns about the U.S. economy's soft first-quarter patch, which suggests that officials are increasingly committed to tightening monetary policy.

Over the last week, the WSJ Dollar Index has gained 0.2%, and 10-year Treasury yields have edged up to 2.356% from 2.281.

Investors now assign a 74% probability that the Fed will raise interest rates in June to 1.25%-1% from their current 0.75%-1% range, futures markets suggest. Economic data will be crucial to gauge how much tightening is in store later in the year.

"The most important part of the report is no longer the monthly figures or the unemployment rate--it's the wage number," said Scott Clemons, chief investment strategist at Brown Brothers Harriman. If we see further acceleration...that gives the Fed the green light on labor market health and a warning light on inflation."

Yifan Xie

and Riva Gold contributed to this article.

Write to Kenan Machado at kenan.machado@wsj.com and Jon Sindreu at jon.sindreu@wsj.com

(END) Dow Jones Newswires

May 05, 2017 05:55 ET (09:55 GMT)