Global Markets Lower Despite Wall Street's Record Gains -- 2nd Update

By Ese Erheriene Features Dow Jones Newswires

Global stock markets started the week on a sour note in Asia despite strong leads from Wall Street, with Hong Kong lagging behind the region amid geopolitical tensions and a pullback in China-related firms.

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The Hang Seng Index was off 0.5% in afternoon trade, after earlier falling as much as 1.6%, amid declines in Chinese financial and property stocks. The Hang Seng China Enterprises Index, which tracks the movement of Chinese companies known as H-shares, was down 1%.

Some market participants credited political unrest in Saudi Arabia with sparking investor jitters in Hong Kong, following a corruption crackdown that resulted in a wave of arrests of royals and cabinet ministers.

"Hong Kong didn't get a chance to respond to the situation over the weekend [and] everything risky in the overseas market affects Hong Kong more than in other Asian markets," said Hao Hong, head of research at BOCOM International.

However, investors also took profit amid comments from China's central bank governor Zhou Xiaochuan about rising risks to China's financial system, said Ivan Ip, a stocks strategist at UOB Group. The news reignited worries of a crackdown on leverage on the mainland, he said.

Mr. Zhou wrote in an article posted Saturday on the website of the People's Bank of China that the risks of China's financial system are increasing. He described the risks as being "hidden, complex, sudden, contagious and hazardous."

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Shares of banking giants ICBC and China Construction Bank fell around 1% each. Among developers, China Evergrande and China Vanke declined 2.6% and 2.3% respectively.

Meanwhile, the emergence of Qatar Airways as the buyer of a 9.6% stake in Hong Kong's Cathay Pacific was a major surprise to the market, and to the airline, which in a brief statement said it was looking to continue its constructive relationship with the Qatar carrier.

However, it asserted that its controlling shareholder, Swire Pacific, together with Air China, still control nearly 75% of the airline. Qatar bought the Cathay stake from Kingboard Chemical, which had been amassing shares in the airline for some time.

Nonetheless, investors were clearly concerned about a company known for its ownership stability, with shares down 1.4% after falling as much as 5%.

Elsewhere in the region, Japan's Nikkei Stock Average reversed early gains, as traders returned after a three-day weekend. The yen pared early sharp declines against the U.S. dollar, when Bank of Japan Governor Haruhiko Kuroda said the central bank would be patient about easing. The dollar was last up 0.2% at Yen114.29 after earlier hitting an intraday high of Yen114.73.

Still, the weaker yen drove Japanese export shares, with Fast Retailing rising 1.5%, Honda Motor up 1.5%, and Suzuki rising 0.5%.

The dollar was also broadly higher against regional currencies in early trade, following Friday's improvement in U.S. employment data. The WSJ Dollar Index was last up 0.1%.

After strong earnings results for Apple helped key U.S. stock indexes close at fresh records on Friday, the mood was less sanguine in Asia, with investors showing caution as U.S. President Donald Trump's regional visit continued. However, many observers weren't expecting significant short-term implications for financial markets.

An early lift for Asian technology stocks dissipated, and technology hub Taiwan's main Taiex reversed gains to trade down 0.1%. The Shanghai Composite was off 0.1%, Australia's S&P/ASX 200 was down 0.2%. Korea's Kospi extended declines and was last off 0.6%.

Financial stocks were a key point of weakness across the region, as expectations for a rise in U.S. interest rates at the December meeting rose after the employment data.

Japan's Topix bank subindex fell 2.1%, while Australia's big four heavily-weighted banks traded lower. Westpac Banking led the declines there, down 2.3% after disappointing earnings.

Australia's four big banks will face earnings pressure from higher write-downs and lower revenue growth this fiscal year, said Fitch Ratings, and added that cost controls remain an important focus for the lenders.

Oil prices started the week modestly higher, building on Friday's gains helped on by fresh drilling-activity declines in the U.S., and the latest developments in Saudi Arabia.

Brent, the global benchmark, was up 19 cents at $62.26 a barrel, while Nymex rose 10 cents to $55.74 a barrel.

Kenan Machado

contributed to this article.

Write to Ese Erheriene at ese.erheriene@wsj.com

(END) Dow Jones Newswires

November 06, 2017 01:02 ET (06:02 GMT)