Global Stocks Follow US Lower as Raft of Fears Grip Investors -- Update

By Georgi Kantchev and Ese Erheriene Features Dow Jones Newswires

Stocks around the world extended losses Wednesday as fresh interest-rate concerns, worries about a new hurricane threatening the U.S. coastline and rising tensions over North Korea continued to hit sentiment.

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The Stoxx Europe 600 fell 0.4% in the early minutes of trading, dragged down by falls in the financial and energy sectors. Most Asian bourses were also flashing red, while futures pointed to a broadly flat opening on Wall Street. The Dow Jones Industrial Average on Wednesday posted its largest one-day decline since August.

Shares of financial firms were hit by dovish comments from Federal Reserve Governor Lael Brainard on Tuesday, 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. Her comments added to investor concerns for banks globally, whose margins have been under pressure much of the past decade in this low-rate environment.

A run of soft inflation data in the U.S. has been contributing to a two-month decline in Treasury yields. On Wednesday, 10-year Treasurys fell slightly to 2.270% after hitting 2017 lows the previous day. Yields move inversely to prices.

Ms. Brainard's comments "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.

Markets were tracking Hurricane Irma, which is poised to hit Florida as soon as Sunday, after growing into one of the most powerful storms ever recorded over the Atlantic Ocean, prompting evacuations in Florida and disrupting air and sea travel.

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Continuing tensions following North Korea's recent nuclear test--its most powerful yet--were also a concern for investors. North Korea issued a defiant response on Tuesday to U.S. attempts to impose new sanctions, declaring that it wasn't cowed by the Trump administration's warnings and hinting at an unspecified "counteroffensive."

In Hong Kong, the Hang Seng Index--among the world's best-performing stock benchmarks this year--was down 0.5% while the Nikkei Stock Average was down 0.1%.

In currencies, the WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, edged down 0.1%. In commodities, gold was down 0.1% while Brent crude fell 0.2% at $53.30 a barrel.

Write to Georgi Kantchev at georgi.kantchev@wsj.com and Ese Erheriene at ese.erheriene@wsj.com

Stocks around the world extended losses Wednesday as fresh interest-rate concerns, worries about a new hurricane threatening the U.S. coastline and rising tensions over North Korea continued to hit sentiment.

The Stoxx Europe 600 fell 0.3% in the midmorning trading, dragged down by falls in the financial and energy sectors. Most Asian bourses were also flashing red, while futures pointed to a broadly flat opening on Wall Street. The Dow Jones Industrial Average on Wednesday posted its largest one-day decline since August.

Strong economic data around the globe has underpinned stock markets this year, with U.S. equities hitting record highs over the summer. But more recently, markets have wobbled as investors grew anxious about how long the bull run can last.

"While the [market] outlook is generally positive, there are a lot of risk factors out there," said Richard Benson, co-head of portfolio investments at Millennium Global Investments. "I'm positive but worried."

Shares of financial firms were hit by dovish comments from Federal Reserve Governor Lael Brainard on Tuesday, 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. Her comments added to investor concerns for banks globally, whose margins have been under pressure much of the past decade in this low-rate environment.

A run of soft inflation data in the U.S. has been contributing to a two-month decline in Treasury yields. On Wednesday, 10-year Treasury yields were broadly unchanged at 2.073% after hitting 2017 lows the previous day. Yields move inversely to prices.

Investors see only a 36% chance of a rate rise by the end of the year, according to Fed-fund futures tracked by CME Group.

Markets were tracking Hurricane Irma, which is poised to hit Florida as soon as Sunday, after growing into one of the most powerful storms ever recorded over the Atlantic Ocean, prompting evacuations in Florida and disrupting air and sea travel.

Continuing tensions following North Korea's recent nuclear test--its most powerful yet--were also a concern for investors. North Korea issued a defiant response on Tuesday to U.S. attempts to impose new sanctions, declaring that it wasn't cowed by the Trump administration's warnings and hinting at an unspecified "counteroffensive."

In Europe, investors were also looking ahead to the next monetary policy meeting of the European Central Bank on Thursday.

Most expect the ECB will hold off until next month to announce the start of winding down its EUR2.3-trillion ($2.7-trillion) stimulus program, known as quantitative easing or QE. But investors were awaiting comments by ECB President Mario Draghi who is expected to offer clues about the stimulus phaseout.

The ECB meeting "may well turn out to be another nonevent, with new policy announcements only likely later in the year," Colin Harte, head of research of BNP Paribas Asset Management, wrote in a note to clients.

In Hong Kong, the Hang Seng Index--among the world's best-performing stock benchmarks this year--was down 0.5% while the Nikkei Stock Average was down 0.1%.

In currencies, the WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, edged down 0.1%. In commodities, gold was down 0.1% while Brent crude rose 0.1% to $53.45 a barrel.

Ese Erheriene contributed to this article.

Write to Georgi Kantchev at georgi.kantchev@wsj.com

(END) Dow Jones Newswires

September 06, 2017 05:30 ET (09:30 GMT)