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 Worries that Greece may run out of money as debt repayments loom
also spread through credit markets, with peripheral eurozone
government debt rising while core German bund yields hit a new
record low.
Top European shares <.FTEU3> were down more than 1 percent, U.S.
equity futures <SPc1> fell 0.7 percent and China H-Share index
futures <HCEIc1> were down more than 5 percent at 1107 GMT (7.07
am.m EDT), with traders saying the market sell-off was worsened by
the expiry of futures and options on European indexes.
Traders said markets were spooked by reports of a crackdown in China
on over-the-counter margin trading and regulatory allowances for
fund managers to lend shares for short-selling, saying this would be
negative for the flow of recent money that has poured into Chinese
exchanges.
"The securities regulator is encouraging short-selling to
institutional investors, and they are going to stop margin trading
on OTC," Ioan Smith, managing director of KCG Europe, said.
"Traders had to catch up with that news after the Bloomberg
terminals came back online, and that's when we saw the falls in
Europe."
However, the MSCI All-Countries index <.MIWD00000PUS> is still set
for a 0.4 percent gain for the week, on track for its third
consecutive weekly gain, as cheap central bank cash buoys markets.
A U.S. interest rate hike in the near term is now seen as less
likely after a recent run of lackluster U.S. economic data that sent
the dollar down for a fourth straight day on Friday to near a
one-week low.
At the same time, lingering worries about upcoming corporate
earnings reports in the United States have been offset by corporate
share buybacks, according to analysts and investors.
"The equity market does appear to have looked through the weakness
in economic data and earnings with extraordinary aplomb," said Sean
Darby, global equity strategist at Jefferies, in a note to clients.
"(U.S.) share buybacks have become a much more important driver for
stock prices in the short-run as earnings-per-share growth wanes."
General Electric <GE.N> posted a first-quarter net loss of $13.6
billion, weighed down by about $16 billion in charges tied to its
exit of GE Capital assets. Excluding special items, GE posted
earnings of 31 cents per share, topping by 1 cent the average
analyst estimate, according to Thomson Reuters I/B/E/S.
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U.S. consumer inflation data is also due, and may reinforce the view
that a near-term rise in rates is less likely.
German 10-year yields hit a new all-time low of 0.05 percent,
creeping closer to zero, as Greece sounded a mix of defiance and
willingness to compromise with its international creditors on
reforms required to unlock more loans. Spanish, Italian and
Portuguese yields rose.
Emerging market stocks hit a new seven-month high and headed for
their third consecutive weekly gain, helped by expectations that a
U.S. rate hike was further away than once thought.
Atlanta Federal Reserve Bank President Dennis Lockhart, a voting
member of the Fed's rate-setting committee this year, said the
recent "murky" run of U.S. data has him leaning against a June
interest rate hike. Lockhart quickly added he was confident the
economy would remain on track.
Comments from Cleveland Fed President Loretta Mester and Boston Fed
President Eric Rosengren also struck dovish tones.
The rate-rise uncertainty left gold prices facing their second
straight weekly drop, while London tin capitulated to more than
five-year lows as growing supply from Myanmar and torpid demand
punished prices.
Brent crude oil prices fell on Friday, ending a run of rallies
earlier in the week, after OPEC said that its output surged in
March, adding to a global glut.
(Reporting by Lionel Laurent; Additional reporting by Alistair
Smout, Francesco Canepa, Jemima Kelly, John Geddie and Christopher
Vellacott; Editing by Mark Trevelyan and Keith Weir)
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