Global Markets Fall as Wild Ride Continues -- Update

By Lucy Craymer Features Dow Jones Newswires

The wild ride for global stock markets continued Friday, with Asian equities declining following selling overnight in the U.S. and Europe.

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The drop in Asia reversed yesterday's gains, which followed declines earlier in the week. It has made for a volatile end to a historically calm first half.

"Sentiment is really key at the moment," said Gavin Parry, managing director of Parry International Trading in Hong Kong. Earlier in the week, markets were whipsawed when some central bankers indicated ultra-easy monetary policies would start to end sooner rather than later.

In Japan, the Nikkei fell below 20000 for the first time in two weeks. It was recently down 1.2% as the yen rebounded across the board, with the dollar easing 0.3% to Yen111.85. A stronger yen often weighs on Japanese stocks.

Friday's worst performer was Australia's S&P/ ASX 200. After rising 1.1% Thursday, the index had slid 1.5% in midafternoon trading there.

It is the last working day of the financial year for a large number of Australian companies, so the stock weakness might be the result of companies' "squaring up their books," said Grant Williamson, a director at Hamilton Hindin Greene in New Zealand. "It has been a very volatile period for the Australian market."

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The ASX 200 has logged three other declines of at least 1% in June after just two from January through May.

Australian banks, after rallying Thursday, gave back much of those gains Friday. National Australia, CBA and Westpac were all down more than 1%.

South Korea and New Zealand, which hit record highs Thursday and are among the regional indexes that logging double-digit first-half gains, were recently lower by 0.4% and 0.8%, respectively. South Korea's Kospi was sunk by the 1.3% drop in index behemoth Samsung.

Parry International's Mr. Parry said investors need to be prepared for "left-field surprises" in Hong Kong as China could make announcements that lift markets or the local economy ahead of Saturday's observation of the 20th anniversary of Britain's returning Hong Kong to Chinese sovereignty. President Xi Jinping is in town to mark the occasion.

The Hang Seng was recently off 0.9% as index heavyweight Tencent fell 1.5%.

Helping limit stock declines in China were the releases of better-than-expected PMI data on both the manufacturing and service sectors. Chinese stock benchmarks were down no more than 0.2%.

This week's commodities rebound persisted. Iron ore rose 1.5% overnight, though that wasn't enough to lift Australian shares.

Oil futures rose 0.6% in Asia trading Friday to build on six straight sessions of gains. But the pace has been plodding, which "tells us traders are acting cautiously rather that boots in straps and all," said Stuart Ive, a client adviser at OM Financial. "The oversupply question mark won't go away."

Write to Lucy Craymer at Lucy.Craymer@wsj.com

Global stocks remained under pressure Friday while government bond yields continued to climb ahead of key readings on inflation.

Futures pointed to a small opening loss for the S&P 500, following widespread declines across Asian markets. The Stoxx Europe 600 was off 0.3% shortly after markets opened, led lower by the chemicals and oil and gas sectors.

Shares of German chemical conglomerate Bayer AG fell around 4% in early trading following reports it would adjust its earnings outlook due to an issue in Brazil.

Brent crude oil was last up 0.4% at $47.80 a barrel, but had moved lower Thursday after European markets closed. Oil prices have risen for six straight sessions but remain nearly 5% lower on the month.

The "pace tells us traders are acting cautiously rather that boots in straps and all," said Stuart Ive, a client adviser at OM Financial. "The oversupply question mark won't go away."

Investors were also waiting for key readings on eurozone and U.S. inflation, due later Friday, to help set expectations for central bank policy. The Federal Reserve's preferred inflation gauge, the price index for personal-consumption expenditures, is due later Friday.

Numbers for the euro area as a whole meanwhile are expected to show the annual pace of price rises eased in June, alleviating pressure on the European Central Bank to back off its expansive stimulus program. Comments earlier this week from ECB President Mario Draghi had sent government bond yields and the euro sharply higher amid expectations that a pickup in the region's economy might prompt it to tighten policy.

Yields on 10-year German government bonds extended gains early Friday to 0.471% from 0.451% Thursday. Treasury yields rose to 2.296% from 2.270%. Yields move inversely to prices.

Earlier, Asian equities declined, echoing losses in the U.S. and Europe on Thursday. Major U.S. stock indexes had slumped amid fresh losses in the technology sector.

In Japan, the Nikkei fell below 20000 for the first time in two weeks before recovering to end down 0.9%. South Korea's Kospi edged down 0.2%, hit by a drop in index behemoth Samsung.

Australia's S&P/ASX 200 slid 1.7% as major bank shares fell.

It is the last working day of the financial year for a large number of Australian companies, so the stock weakness might be the result of companies' "squaring up their books," said Grant Williamson, a director at Hamilton Hindin Greene in New Zealand. "It has been a very volatile period for the Australian market."

The Hang Seng was recently off 0.6% amid declines in shares of Tencent. Helping limit stock declines in China were the releases of better-than-expected PMI data on both the manufacturing and service sectors. The Shanghai Composite Index edged up 0.1%.

Write to Riva Gold at riva.gold@wsj.com and Lucy Craymer at Lucy.Craymer@wsj.com

Stocks and bonds showed signs of stabilizing on the final day of the second quarter as investors focused on fresh signals on the global inflation picture.

While stocks around the world have spent most of the year climbing and government bond yields have remained ultralow, those trends have reversed this week amid pressure on the tech sector and worries that global central banks may be tightening policy faster than previously expected.

Futures pointed to flat opening for the S&P 500, brushing off widespread declines across Asian markets. The Stoxx Europe 600 recovered from early losses to trade up 0.3% midmorning as a rebound in the technology sector helped offset a drop in chemicals companies.

Price gauges for the eurozone and U.S. will be closely watched by the European Central Bank and Federal Reserve. The WSJ Dollar Index edged up 0.1% from its lowest close since November as investors waited for the Fed's preferred inflation gauge, the price index for personal-consumption expenditures, which is due later Friday.

Federal Reserve Bank of St. Louis President James Bullard questioned the strength of U.S. inflation on Thursday and said he didn't support raising short-term interest rates again this year. "I think we have been overly hawkish, especially with regard to our future plans," he told reporters.

In the eurozone, data Friday showed the annual pace of inflation fell for a second straight month in June to the lowest so far in 2017, alleviating pressure on the ECB to back off its stimulus program.

The euro was last down 0.4% at $1.1398, a touch lower after the inflation data, but was on track to end the week 1.8% higher. Comments earlier this week from ECB President Mario Draghi had sent government bond yields and the euro sharply higher amid expectations that a pickup in the region's economy might prompt it to tighten policy.

Yields on 10-year German government bonds were little moved after the eurozone inflation data Friday, trading around 0.439% from 0.451% Thursday. Treasury yields steadied at 2.273% from 2.270%. Yields move inversely to prices. The gap between Treasury yields and German government bonds was still around its tightest since the U.S. election in November.

Most investors remained confident that the economic outlook in the eurozone remained bright. Eurozone businesses and consumers were more optimistic in June than at any time since before the global financial crisis, data showed this week.

"We think Europe is finally on track," said Andy Flynn, fund manager at William Blair. In the first six months of the years, concerns have mounted over the Trump administration's ability to push through as many changes as they had hoped, while political risks in Europe have faded just as the economy has strengthened, he said.

The global bond selloff had spread to Asia earlier Friday, pushing the yield on Japan's 10-year government bond to its highest in more than three months.

Asian equities declined, echoing losses in the U.S. and Europe on Thursday. Major U.S. stock indexes had slumped amid fresh losses in the technology sector.

In Japan, the Nikkei fell below 20000 for the first time in two weeks before recovering to end down 0.9%. South Korea's Kospi edged down 0.2%, hit by a drop in index behemoth Samsung, while Australia's S&P/ASX 200 slid 1.7% as major bank shares fell.

Friday's stock weakness there might be the result of companies' "squaring up their books," on the last working day of the financial year for a large number of Australian companies, said Grant Williamson, a director at Hamilton Hindin Greene in New Zealand.

The Hang Seng was recently off 0.8% amid declines in shares of Tencent, while the Shanghai Composite Index edged up 0.1%. Releases of better-than-expected PMI data on both the manufacturing and service sectors helped keep Chinese markets steady.

-Paul Hannon contributed to this article.

Write to Riva Gold at riva.gold@wsj.com and Lucy Craymer at Lucy.Craymer@wsj.com

(END) Dow Jones Newswires

June 30, 2017 05:50 ET (09:50 GMT)