Stocks in Asia extended losses, which followed U.S. equity market declines after they had their first chance to price in North Korea's Sunday nuclear test.
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After Monday's holiday, major U.S. indexes logged nearly 1% declines across the board overnight, led by a sharp drop in financial stocks on fresh interest-rate concerns, casting a cloud over Asian equities.
In Hong Kong, the Hang Seng Index--among the world's best-performing stock benchmarks this year--finished morning trading down 1% to log region-worst declines amid a 1.4% drop in index heavyweight HSBC and declines of at least 1% in Chinese-based banks. However, many markets in the region were seeing declines of less than 0.4% by midday.
Lenders were notably hit by dovish comments from Federal Reserve Governor Lael Brainard, who said the U.S. 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.
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 noted, adding that Donald Trump's Tuesday-morning tweet about selling more military equipment to Japan and South Korea added to the risk-off mood in the U.S.
The Nikkei Stock Average was down 0.3% in early afternoon trading. At the same time, the yen rebounded anew, including hitting a series of one-week highs against the dollar, which weighed on export stocks. The greenback was recently around Y108.65 after moving back toward 2017's low in morning trading.
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Financials were weak across Asia following the U.S. selloff, which also happened as 10-year Treasury yields hit 2017 lows at just above 2%.
With Category 5 Hurricane Irma poised to hit Florida as soon as Sunday--which will be about two weeks after Hurricane Harvey hit Texas--Ms. Brainard's comments about still-soft inflation and how quickly future rate increases may come was a sour note for banks globally, whose margins have been under pressure much of the past decade in this low-rate environment.
Depending on where Irma may make landfall and the resultant damage, economic impacts could also further depress the prospects of a December rate increase, said Margaret Yang, a market analyst at CMC Markets. The futures market is only pricing in a 37% chance of any further interest-rate increases this year, according to CME data.
Australia's "big four" banks were down about 1% and Japan's Topix bank subindex slid 1.4%.
Meanwhile, oil futures were down modestly in Asia after 2% to 3% gains overnight. Brent was recently off 0.4% at $53.16 a barrel. And gold prices were little changed, remaining at 11-month highs.
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(END) Dow Jones Newswires
September 06, 2017 01:11 ET (05:11 GMT)