Financials Weigh on Global Stocks

By Ese ErherieneFeaturesDow Jones Newswires

Global stocks continued their selloff Wednesday, notably in financials, with Asian equities 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.

Continue Reading Below

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.

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 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 while falling 0.3% amid weakness in export and financial stocks. Banks were leading the declines in Australia, where the S&P/ASX 200 was also down 0.3%.

Similar declines were seen elsewhere in the region, except for Hong Kong. There, the Hang Seng Index--among the world's best-performing stock benchmarks this year--fell 0.9% amid a 1.4% drop in index heavyweight HSBC 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.

Australia's "big four" banks were down some 1%, and Japan's Topix bank subindex slid 1.5%.

Meanwhile, oil futures were down modestly in Asia after 2% to 3% gains overnight. Brent was recently off 0.5% at $53.13 a barrel. And gold prices were little changed, remaining at 11-month highs.

(END) Dow Jones Newswires

September 05, 2017 22:21 ET (02:21 GMT)