Global Markets: Equity markets drop amid continued volatility, bond yields flat

By Caroline Valetkevitch

NEW YORK (Reuters) - World share markets fell on Friday, with U.S. equity indexes swinging between positive and negative territory, a day after a plunge that confirmed a correction for the market, while benchmark Treasury yields were set to close the week little changed.

Concerns about higher bond yields and interest rates spurred recent selling of equities, though the retreat in the market had been long awaited by investors after months of rallying.

A rout in U.S. stocks overnight, a slump in Chinese shares and worries over rising borrowing costs and volatility took their toll on equity markets in Europe and Asia as well. A key gauge of global stock indexes was down nearly 1 percent.

On Thursday, the Dow Jones Industrials and S&P 500 indexes slumped more than 10 percent from their Jan. 26 record highs, and volatility that plagued the market all week left investors wondering when the market's recent slump would find a floor.

"This may be a bottoming process," Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.

"I'd like to see buying come in late in the day instead of having a selloff like we had yesterday," he said. "Also, if we see some stabilizing in interest rates and bond yields in particular, that would seem to indicate what's going on there has settled down."

Higher yields tend to hurt equities because they increase borrowing costs for companies and ultimately consumers. They also present an alternative to investors who may reallocate some funds to bonds from equities.

On Friday, benchmark 10-year notes were last down 2/32 in price to yield 2.855 percent, near where they ended at last Friday.

The Dow Jones Industrial Average fell 132.73 points, or 0.56 percent, to 23,727.73, the S&P 500 lost 6.69 points, or 0.26 percent, to 2,574.31 and the Nasdaq Composite dropped 18.53 points, or 0.27 percent, to 6,758.63.

The pan-European FTSEurofirst 300 index lost 1.66 percent and MSCI's gauge of stocks across the globe shed nearly 1 percent.

Emerging market stocks lost 1.78 percent.

Earlier, the Shanghai Composite Index had tumbled as much as 6.0 percent to its lowest since May 2017, and the blue chip CSI300 index dived 6.1 percent.

Chinese equities were hurt by the drop in global shares and by traders closing positions before the Lunar New Year holidays starting next week.

U.S. GOVT SHUTDOWN BRIEF

Rising U.S. debt issuance is expected to weigh on bond prices in the coming months.

The U.S. House of Representatives joined the Senate early on Friday in approving a budget bill that raises military and domestic spending by almost $300 billion over the next two years. With no offsets in the form of other spending cuts or new tax revenue, that additional spending will be financed with borrowed money.

In currencies, the dollar clung to its earlier gains against a basket of currencies as Wall Street's major indexes edged up.

The dollar index rose 0.22 percent, with the euro down 0.09 percent to $1.2234.

Oil sank as record-high U.S. crude output added to concerns about a sharp rise in global supplies.

U.S. crude fell 2.16 percent to $59.83 per barrel and Brent was last at $63.50, down 2.02 percent on the day.

(Additional reporting by Karen Brettell in new York and Marc Jones in London; Editing by Bernadette Baum)