Global Markets Fall on Worries About Central Bank Tightening -- Update

By Lucy Craymer Features Dow Jones Newswires

Equity markets across the Asia-Pacific region were lower Friday, tracking declines in the U.S. and Europe, as the prospect of global central-bank tightening made investors more cautious.

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Australia's benchmark ASX/S&P 200 was leading the declines, down 0.9%, as a fall in bank stocks outweighed a rally in mining stocks, which benefited from stronger iron-ore prices, up 2% in early trading. Among banks, Macquarie Group was down 1.3%, Westpac Banking 1.1% and National Australia 1.1%. Miners BHP Billiton and Rio Tinto were both up 0.8%.

"The weaker U.S. dollar saw copper and iron ore move higher in overnight trading so it was thought [energy and mining stocks] could do better than the rest of the market," said Michael McCarthy chief market strategist at CMC Markets in Australia.

Elsewhere, Japan's Nikkei Stock Average was down 0.5%, Singapore's Straits Times Index was off 0.2% and Hong Kong's Hang Seng Index had slipped 0.4% at the midday break.

"Why would you buy?" asked Chris Weston, chief market strategist at IG in Australia, in light of weak market sentiment. "There is a pickup in [shortselling] interest and there are few clouds over the macro outlook."

Trading activity is broadly muted, he said: "We are seeing very few bids coming through in the market with few people selling."

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In China, the Shanghai Composite Index was off 0.2% in the morning session, dragged lower by a selloff in large-cap stocks, on concerns about a deleveraging-related liquidity crunch. On Friday, the People's Bank of China skipped open-market operations--a key tool to pump liquidity into the market--for the 11th straight session.

Yields in Asian bond markets continued to rise on worries that global central banks will dial back stimulus. The latest declines in bond prices, which push yields higher, have been driven in part by minutes from the European Central Bank's last meeting, which showed officials are considering dropping a pledge to accelerate bond purchases.

In Japan, investor focus was on Japanese government bond yields. The 10-year yield rose to a five-month high of 0.105% early Friday, prompting Bank of Japan to announce a fixed-rate bond-buying operation, which sent yields back down to around 0.087%.

The central bank also increased purchases of five-to-10-year JGBs in its regular operation to Yen500 billion ($4.4 billion) from Yen450 billion earlier this week, in hopes of calming market jitters.

In the commodities market, silver futures plunged as much as 10% early Friday morning before quickly recovering nearly all the declines, suggesting a trading error. If the drop "had real volumes behind it, [prices] would not have bounced back so quickly," said Stuart Ive, client manager at OM Financial. "It suggests trading error rather than anything more serious at this point of time."

Elsewhere, oil prices were down 1.2% in Asian trade, extending overnight declines after data showed that U.S. oil production last week rebounded strongly, rising by 88,000 barrels a day, nearly matching the previous week's decline.

"That sharp correction suggests that circa US$45 a barrel is likely a key price level for U.S. oil producers right now," said Vivek Dhar, a commodities analyst at Commonwealth Bank of Australia.

He also noted that aluminum prices rose on supply concerns after China's Henan province said it aims to shut over 500,000 metric tons of annual smelter capacity, reducing global supply by around 0.8%.

Biman Mukherji contributed to this article.

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

Global stock markets were lower and government bond yields rose Friday as investors weighed the prospect of tighter policies by central banks around the world.

The Stoxx Europe 600 edged down 0.2% in the early minutes of trading, weighed down by energy and health care shares. That followed losses across Asia. In U.S. markets, futures pointed to a 0.1% opening gain for the S&P 500.

Hawkish signals from policy makers in Europe and the U.S. have roiled markets in recent days as investors gauge how fast central banks will be moving away from their ultra-accommodative monetary policies put in place after the financial crisis. Minutes from the European Central Bank's last meeting released Thursday showed officials are considering dropping a pledge to accelerate bond purchases.

In the U.S., traders on Friday will be looking to the U.S. June employment report, a key data point for the Federal Reserve.

Economists surveyed by The Wall Street Journal expect firms added 174,000 jobs and an unemployment rate of 4.3%, on par with May's level which was the lowest in 16 years. If the unemployment rate holds or even falls, that would suggest the labor market is tightening and reinforce the Fed's plans to raise short-term rates a third time this year.

The yield on 10-year Treasurys rose to 2.386% from 2.334% on Thursday, while German 10-year bund yields were higher at 0.572%. Yields move inversely to prices.

The WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, was up 0.1% in early trading Friday.

In commodities, Brent oil prices were down 1.2% at $47.55 a barrel, extending overnight declines after data showed that U.S. oil production last week rebounded strongly. Gold was down 0.2%.

Biman Mukherji contributed to this article.

Write to Georgi Kantchev at georgi.kantchev@wsj.com and Lucy Craymer at Lucy.Craymer@wsj.com

(END) Dow Jones Newswires

July 07, 2017 03:40 ET (07:40 GMT)