By Xie Yu

International stock markets fell Friday, tracking declines in the U.S., with China's benchmark stock index ending a sharp rally.

The Shanghai Composite Index closed 1.95% lower at 3383.32, with insurers, banks, and coal and steel companies among the biggest individual decliners.

Hong Kong's Hang Seng tumbled 2.1%, while stock benchmarks in Japan, South Korea and Australia shed 0.6% to 1.1%. E-mini S&P 500 futures declined 0.8%.

Through Thursday, the Shanghai Composite had risen 16.5% over eight straight sessions of gains, the biggest eight-day percentage gain since March 2008, according to Dow Jones Market Data.

However, authorities have signaled concern about the market overshooting, with a state-run financial newspaper stressing the importance of long-term investment.

Some investors, particularly institutions, may have sold to lock in profits, said Alvin Ngan, strategist at Zhongtai International Holdings, a Hong Kong-based brokerage. He said filings showing that big players such as the National Council for Social Security Fund, a pension fund, had offloaded stocks could have served as a sell signal in China.

"The cooling tone from the authorities could take some of the sheen off the frenetic market. But investor sentiment is still very strong, " Mr. Ngan added.

Frank Benzimra, head of Asia equity strategy at Société Générale, said investors should remain "strategically overweight" on Chinese stocks, including those listed offshore, citing reasons such as an increasingly likely recovery in earnings and future market reforms.

The pullback helped buoy prices for Chinese government bonds. The recent rally in stocks had added fuel to a selloff that began in late April and pushed yields up from about 2.5% to 3.175%, according to Tullett Prebon data, as investors dumped bonds for shares. Bond yields and prices move inversely to each other. On Friday yields stood at about 3.127%.

Edmund Goh, Asian fixed-income investment director at Aberdeen Standard Investments in Shanghai, said bond buying by foreign investors hadn't been enough to offset selling by local bond funds, which faced redemptions after the market's recent lukewarm performance.

Write to Xie Yu at Yu.Xie@wsj.com

(END) Dow Jones Newswires

July 10, 2020 03:52 ET (07:52 GMT)

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