Most Asian stocks drop before Greek referendum amid worry over China stock rout

Pedestrians looking at the Nikkei Stock Average and 225-issue Tokyo stock index display.
Pedestrians looking at the Nikkei Stock Average and 225-issue Tokyo stock index display. PHOTO: EPA

WELLINGTON (BLOOMBERG) - Most Asian stocks fell, while bonds in the region rose, as investors awaited Greece's bailout referendum amid concern over a rout in Chinese equities.

Japan's Nikkei 225 Stock Average lost 0.4 per cent by 9:32 a.m. in Tokyo, headed for its fourth weekly drop in five weeks, while Australian stocks slid amid a slump in iron-ore prices. Chinese index futures signaled further losses.

Greece's unexpected decision to halt talks and call a referendum on austerity demands along with wild gyrations in Chinese shares have dominated markets this week, with global equities set for their first weekly drop in a month. China said it will probe and "strictly" punish stock manipulation, after announcing new measures this week to ease the pressure of losses on leveraged investors. US payrolls data indicated that while more jobs are being created, wages have stagnated.

"There could be some hesitation from investors" ahead of the Greek vote, Chris Weston, chief market strategist at IG Ltd. in Melbourne, said by phone.

"Markets just want to see it getting solved so the contagion effect can be mitigated and we can move on to other things. The US wage data was a bit disappointing and the market has pared back a little bit of the expectation for when the Fed will hike."

Employers in the US added 223,000 jobs in June following a 254,000 increase in the previous month that was less than previously estimated, Labor Department figures showed Thursday. The jobless rate fell to a seven-year low of 5.3 per cent as more people left the labor force.

While the US job market has rebounded, faster wage growth has been slow to follow suit. The participation rate, which indicates the share of working-age people in the labor force, decreased to 62.6 per cent, the lowest level since October 1977, from 62.9 per cent. The Federal Reserve is scrutinizing economic data as policy makers consider the timeline for the first US rate hike since 2006.

Fed funds futures showed a 29 per cent chance the central bank will increase rates in September, down from 35 per cent Wednesday, and priced in a 67 per cent chance by December, declining from 72 per cent, according to data compiled by Bloomberg.