ANZCD Australia And New Zealand Banking Group Limited

The New Zealand share market, the first market to open in Asia, has fallen more than 1% in early trading Thursday, after a volatile session for global markets overnight.

Other regional markets are likely to follow suit, although the pullback seen in the S&P 500 from midway through the U.S. session has calmed futures predictions for the Asian session, said Angus Nicholson, a market analyst at IG in Melbourne.

The Australian stock exchange is one of the only markets in Asia looking to open in positive territory, helped by bank stocks that look set to pare steep losses. In Japan, the Nikkei is set to plunge deeper into technical bear market territory.

The Dow Jones Industrial Average fell 249.28 points Wednesday, but major U.S. stock indexes pared early losses in the final hour of trading, as the wide swings that have characterized markets in 2016 continued.

The Dow industrials lost 1.6% to 15766.74. The S&P 500 declined 1.2%, while the Nasdaq Composite lost 0.1%. At one point earlier in the session, the Dow average was off more than 500 points, as falling oil prices and worries about global growth weighed on markets.

Grant Williamson, a New Zealand-based investment adviser, said the late bounceback in the U.S. provided a little bit of encouragement for the New Zealand market, but he still expects trading weakness, as some nervous New Zealand investors exit the market. The NZX-50 index lost 1.03% in early trading, to 6050.73.

Michael McCarthy of CMC in Sydney said Thursday would be a key trading day for markets, and could set the tone for the rest of the year. Some investors would argue that the late pullback in U.S. stocks showed that the bottom had been hit, he said, while others would say that the wildly volatile session suggests things are about to get a whole lot uglier.

Mr. McCarthy said a number of key indexes have hit very important support levels. "If they bounce off those levels, that will give a lot of investors and traders, particularly technically based investors and traders, the confidence to buy into the market." If that happens, he said there could be significant rises over the next week.

"However, the other is just as possible at the moment," he said. "If markets sell off over the next 24 hours and break those support levels that's likely to bring in further selling. So it's a very important couple of trading sessions for the future of markets."

ANZ Bank said investor nervousness is on the cusp of turning to panic in global markets.

"Those who have tried to catch falling knives are nursing some ugly wounds as commodities and equities fail to find floors," the bank said in a research note, adding it suspects it will be some time before calm returns to markets.

In Japan on Wednesday, the Nikkei Stock Average fell 3.7% pulling the index into bear territory—commonly defined as a 20% drop from a recent high. Hong Kong's Hang Seng Index dropped 3.8%, but losses were more muted on China's Shanghai Composite Index, which fell 1%. In Australia, the S&P/ASX 200 fell 1.3% and in Europe the Stoxx Europe 600 fell 3.2%.

U.S. crude prices had their biggest one-day percentage loss since September, falling below $27 a barrel, further punishing energy stocks.

Write to Kate Geenty at kate.geenty@wsj.com

(END) Dow Jones Newswires

January 20, 2016 19:45 ET (00:45 GMT)

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