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 Australia's central bank joined the growing line of those adding
stimulus, surprising many investors by cutting interest rates to a
record low of 1.75 percent. That hit the currency but lifting the
country's shares.
Almost every other major stock market around the world fell. MSCI's
broadest index of Asia-Pacific shares outside Japan hit a three-week
low, Europe's major indices shed as much as 2 percent and emerging
market stocks fell 1.2 percent.
U.S. futures pointed to a fall of almost 1 percent at the open on
Wall Street.
European financials fell more than 3 percent, hit by a string of
weak first quarter earnings reports from banks and the euro's burst
to an eight-month high above $1.16. European bank stocks are down
more than 20 percent so far this year.
Shares in German lender Commerzbank fell almost 10 percent after
profits slumped in the first quarter.
"The numbers for the first quarter did not come in well ... however
external factors that have also hit other banks hard appear to be
the main reason for that," said Landesbank Baden-Wuerttemberg
analyst Ingo Frommen.
Shares in Swiss bank UBS were down 8 percent, also after first
quarter results.
Europe's FTSE 300 index of leading 300 shares and Germany's DAX shed
almost 2 percent, both falling to their lowest in nearly three
weeks.
In currency markets the yen rallied towards 105 per dollar, its
highest in 18 months.
It was as low as 122 a few months ago, and the sharp gains since
will do nothing to relieve deflationary pressures in Japan.
The dollar index, a measure of the dollar's value against a basket
of major currencies, fell to 92.00. It was last there in January
2015.
The yen has accelerated its ascent since the Bank of Japan surprised
markets last week by keeping monetary policy unchanged in the face
of growing headwinds for its economy.
U.S. YIELDS FALL
Japan is in the middle of its Golden Week series of holidays.
Markets were closed on Friday and will be closed from Tuesday to
Thursday this week.
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In Australia, stock markets cheered the rate cut with the benchmark
index easily the outperformer in Asia and extending gains to close
up more than 2 percent on the day.
The Australian dollar dropped sharply, falling below 0.76 against
the greenback from 0.77 earlier.
Bond yields fell across the board, with the fall in U.S. Treasury
yields outpacing the decline in European yields. The U.S. curve was
down as much as 6 basis points, and the benchmark 10-year yield was
at 1.81 percent.
After raising interest rates in December for the first time in
nearly a decade, the Federal Reserve held monetary policy steady
last week. While it kept the door open to a hike in June, it gave no
signal that it was in a hurry to tighten further given the economy's
slowdown, even as the labor market has improved.
"The Fed still thinks growth will be just over 2 percent this year
but, on the evidence of Q1, it seems more likely that the euro zone
will scale 2 percent, not the U.S.," said Steve Barrow, head of G10
strategy at Standard bank.
"The upshot is that market expectations for U.S. growth might be too
high – as investors take their cue from the Fed's forecasts – while
those for the euro zone are too low."
Crude oil prices lost ground, with U.S. crude futures down 1
percent at $44.32 a barrel.
Spot gold got a boost from the weak dollar, briefly rising above
$1,300 an ounce.
(Reporting by Jamie McGeever; editing by John Stonestreet)
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