Asia stocks headed for their steepest drop in more than a month as oil's selloff revived concerns over global growth and after Japan's fiscal stimulus package fell short of what some investors had expected. The dollar rebounded.
Japan's Topix index sank more than 2 percent after the yen, which typically moves at odds with local shares, jumped 1.5 percent last session. Crude held losses below $ 40 a barrel before an update on U.S. oil inventories, while gold was near its highest price since July 11. The Malaysian ringgit led emerging currencies lower against the greenback, and New Zealand's currency also slid. European equities fluctuated after a two-day drop as HSBC Holdings Plc jumped on announcing a share buyback.
A four-week advance in global equities has faltered as crude descended into a bear market. With investors looking to central banks and governments around the world to shore up growth, Japan's announcement Tuesday that it would boost spending by 4.6 trillion yen ($ 45 billion) in the current fiscal year failed to ignite optimism that Prime Minister Shinzo Abe can revive the world's third-biggest economy. The Bank of England is projected to cut rates Thursday.
"Lower oil prices seems to be impacting the risk sentiment negatively," said Divya Devesh, a Singapore-based foreign-exchange strategist at Standard Chartered Plc. "If oil continues to decline it will be negative for emerging-market assets."
A slew of services purchasing managers' indexes were due Wednesday, with figures from China showing a slower pace of expansion in July and a report on Europe still to come. Thailand held benchmark rates in a policy review, as expected.
Stocks
The Stoxx Europe 600 Index added as much as 0.4 percent and fell 0.1 percent by 8:21 a.m. London time, with HSBC rallying 3.7 percent to be the biggest boost to the gauge. The lender announced a $ 2.5 billion share buyback for this year, seeking to soften the blow to investors as global economic uncertainty prompted it to abandon a 2017 profitability target and step back from its plans to boost dividends.
The MSCI Asia Pacific Index fell 1.8 percent, set for its biggest drop since June 24, as all 10 industry groups declined.
Australia's S&P/ASX 200 Index decreased 1.4 percent amid losses in banks. The Kospi index in Seoul slid 1.2 percent. Hong Kong's Hang Seng Index sank 1.7 percent as trading resumed after the market was shut on Tuesday because of a storm. The Topix lost 2.2 percent, and is down almost 4 percent this week.
"A risk-off mood is coming to the forefront," said Chihiro Ohta, a senior strategist at SMBC Nikko Securities Inc. in Tokyo. "In Japan, where many companies, especially in the auto sector, are easily affected by currency moves, the strength in the yen weighs on the overall profits for listed firms."
E-mini futures on the S&P 500 Index retreated 0.1 percent after the underlying index slipped 0.6 percent Tuesday, led lower by retailers and industrial stocks. The S&P 500 notched its first back-to-back declines since the aftermath of the U.K.'s decision to quit the European Union.
Currencies
The Bloomberg Dollar Spot Index, a gauge of the U.S. currency against 10 major peers, added 0.2 percent, after sliding 0.6 percent in the previous session amid waning bets on the Federal Reserve raising interest rates in 2016.
The yen weakened 0.3 percent to 101.18 per dollar, after touching 100.68 on Tuesday, its strongest level since July 11. The Japanese government's plan incorporates 13.5 trillion yen of fiscal measures — including 7.5 trillion yen in new spending starting this year, and 6 trillion yen in low-cost loans.
For more on Japan's fiscal stimulus boost, click here.
"After all the build-up, it's a disappointment," Shane Oliver, a global investment strategist at AMP Capital Investors Ltd. in Sydney, which manages more than $ 110 billion, said by phone.
The British pound fell 0.4 percent. All but two of 52 economists in a survey predict the Bank of England's Monetary Policy Committee will cut its key rate on Thursday for the first time since 2009.
The kiwi retreated 0.7 percent to 71.92 U.S. cents after jumping 1 percent last session, while the ringgit declined 0.8 percent.
Bitcoin fell after one of the largest exchanges halted trading because hackers stole about $ 65 million of the digital currency. Bitcoin lost 4.4 percent against the dollar, bringing its three-day drop to 17 percent.
Bonds
Australian notes due in a decade yielded 1.93 percent, up 11 basis points after they slid to an all-time low on Tuesday. The Reserve Bank of Australia delivered its second quarter-point cut for 2016 that day, taking the cash rate to a record-low 1.5 percent, as expected by a majority of economists and investors.
Yields on 10-year New Zealand debt added five basis points to 2.2 percent, while rates on similar maturity Treasuries slipped one basis point to 1.54 percent, following a two-day advance of about 10 basis points.
Bill Gross, the former chief investment officer of Pacific Investment Management Co., reiterated his warning on government debt Tuesday after yields touched all-time lows in the past month. The danger of the unprecedented rally, as Gross sees it, is that any reversal will be painful for investors.
Commodities
West Texas Intermediate crude added 0.1 percent to $ 39.53 a barrel, after falling 5 percent over the past two sessions.
"The decline is not totally unexpected, but the speed and severity of the fall has been a surprise," said Daniel Hynes, senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Sydney. "Disruptions tightened the market during the second quarter and the sustainability of those was always going to be relatively short lived. There are still relatively high inventories but the market is approaching a balance."
U.S. oil inventories dropped by 1.34 million barrels and gasoline stockpiles fell, the American Petroleum Institute was said to have reported. Government data out Wednesday is forecast to show crude and motor fuel supplies decreased.
Gold for immediate delivery was little changed at $ 1,364.32 an ounce.
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