Global Stocks Hit by Sliding Commodities Prices

By Kenan Machado and Jon Sindreu Features Dow Jones Newswires

A fall in commodity prices dragged down global stocks Friday.

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The Stoxx Europe 600 was down 0.3% in early European trade. The fall was led by the oil and gas sector and basic resources, which tumbled 0.9%. Futures pointed to an 0.1% opening loss for the S&P 500.

In Asia, Hong Kong's Hang Seng and the Shanghai Composite Index were down 0.9% and 0.8% respectively. Australia's S&P/ASX 200 lost 0.7%. Markets in Japan and South Korea were closed for holidays.

A sharp drop in oil prices caps a bad week for commodities. Oil is now at its lowest since November, when the Organization of the Petroleum Exporting Countries agreed to cut output for six months.

Brent crude futures were down 1% to $47.88 a barrel, while WTI futures fell 1.5% to $44.84 a barrel.

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

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Other investors, however, are confident that companies in the energy sector are now more resistant to falls in the price of crude than they were when oil started a nose dive in late 2014.

"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. "Production is also more controllable these days to keep prices steady."

A key riser among European stocks Friday was International Consolidated Airlines Group SA, owner of British Airways and Iberia, which rose almost 6% after its first-quarter operating profit figures beat analysts' expectations.

Meanwhile, metals have been battered throughout the week, on the back of 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 be stronger after a soft March reading. On Thursday, the Federal Reserve brushed off concerns about the U.S. economy, which suggests that officials are increasingly committed to tightening monetary policy.

"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 04:07 ET (08:07 GMT)