ASIA MARKETS: Nikkei Hits 4-month Low As Asian Markets Continue Selloff

By Ese Erheriene Features Dow Jones Newswires

Bank stocks weigh on indexes in Japan, Australia

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Asian stocks fell Wednesday, following up on the near-1% declines seen on Wall Street as a holiday-shortened trading week began there.

Tuesday was many U.S. market participants' first opportunity to react to North Korea's weekend claim of a successful hydrogen-bomb test, which sent Asian equities down on Monday. A number of markets there rebounded some on Tuesday.

The selling returned to Asia on Wednesday, though there weren't big declines but rather a continuation of recent risk-off sentiment. The yen continued to hit one-week highs versus the dollar, for example.

Also not helping Tuesday's U.S. trading were dovish comments from Federal Reserve Governor Lael Brainard, who said the central bank should be cautious about raising short-term interest rates further until policy makers are confident of overcoming the "persistent failure" to reach 2% inflation.

Read:Brainard says Fed may have to slow interest-rate hikes given subdued inflation (http://www.marketwatch.com/story/fed-may-have-to-slow-interest-rate-hikes-given-subdued-inflation-brainard-2017-09-05)

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She "started the ball rolling" regarding the selling, said Chris Weston, chief market strategist at IG Group. The comments came "at a sensitive time for markets," he said, adding that U.S. President Donald Trump's Tuesday-morning tweet about selling military equipment to Japan and South Korea added to the risk-off mood in the U.S.

As the dollar fell back below Yen109 overnight and U.S. Treasury yields reached 2017 lows of just above 2%, Japan's Nikkei Stock Average hit a fresh four-month low during the session. It closed down 0.1% amid weakness in export and financial stocks. Banks led declines in Australia, where the S&P/ASX 200 fell 0.3%.

Hong Kong's Hang Seng Index -- among the world's best-performing stock benchmarks this year -- fell 0.5% amid a 1.3% drop in index heavyweight HSBC (HSBA.LN) and declines of at least 1% in Chinese-based banks.

Financial stocks were notably weaker in the U.S. on Tuesday amid doubts about how quickly interest-rate increases there will come. The U.S. rate outlook is important for Asian financials as well, as margins have also been under pressure there in the global low-rate environment.

Of Australia's "big four" banks, Westpac Banking Corp. (WBK) fell 1.1% and Commonwealth Bank of Australia (CBA.AU) lost 1.2%. Japan's Topix bank subindex slid 1.2%.

(END) Dow Jones Newswires

September 06, 2017 06:22 ET (10:22 GMT)