US stock prices fell from record highs yesterday led by weakness in the financial sector due to five banks paying fines to settle charges of currency rigging, while the oil market sagged on concerns about a supply glut, keeping benchmark Brent prices near a 4-1/2-year low.
Global regulators fined UBS AG , HSBC Holdings Plc, Royal Bank of Scotland, JPMorgan and Citigroup Inc $3.4 billion for failing to stop their traders from trying to manipulate the foreign exchange market.
“The imposition of fines by the watchdog basically weighed on European bank stocks, and as a result the market is following suit here,” said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.
In early trading, the Dow Jones industrial average fell 47.72 points, or 0.27 per cent, to 17,567.18, the S&P 500 declined 4.61 points, or 0.23 per cent, to 2,035.07 and the Nasdaq Composite decreased 5.52 points, or 0.12 per cent, to 4,655.04.
The pan-European FTSEurofirst 300 equity index was down 1 per cent, while the STOXX Europe 600 banks index slid nearly two per cent.
Earlier, Tokyo's Nikkei closed 0.4 per cent higher at 17,197.05, its highest since October 2007, amid expectations Prime Minister Shinzo Abe would postpone a tax hike and may call an election for December.
The pullback in US and European stocks stoked safe-haven bids for US Treasuries and German Bunds with their 10-year yields falling to 2.32 per cent and 0.80 per ent, respectively.
In the currency market, the dollar weakened 0.5 per cent against the yen at 115.205 yen on the EBS trading system after it posted a seven-year high of 161.11 on Tuesday.
The greenback strengthened against the British pound as the Bank of England's view on weak domestic inflation pushed back expectations on the timing of a rate hike into late 2015. Sterling was last down 0.65 per cent at $1.5815, not far from Friday's 14-month low of $1.5791. The dollar was steady against the euro, last at $1.248 .
Prices of Brent crude in London fell for a third straight session, approaching $81 a barrel for a near four-year low on rising US output and a restart of Libya's biggest operational oilfield. US crude futures shed nearly one per cent at $77.19.
Spot gold prices inched up 0.08 per cent to $1,165.70 an ounce, extending their recovery from a 4-1/2-year low set last Friday.