Asian Stocks End Mostly Lower; Europe Falls

Updated from 2:01 a.m. EDT

By Jeremiah Marquez

HONG KONG -- World stock markets pulled back Wednesday, sending Japan's benchmark down more than 2%, after a selloff Tuesday on Wall Street amid resurgent fears about the U.S. financial sector.

European markets fell in early trading, following wide-ranging losses in Asia that hit banks, commodity producers and exporters especially hard. Oil prices rose, while the dollar weakened against the yen.

Chinese stocks gained, bucking the slump, amid figures that showed manufacturing expanded for the sixth straight month in August.

But otherwise, investors showed little appetite for risky assets after U.S. markets tumbled as rumors about escalating bank troubles revived concerns about the health of the financial industry and the economy as a whole.

After a powerful six-month rally, markets worldwide have started teetering, pressured by worries about diminished liquidity and lofty stock prices many believe have become unhinged from the world economy's prospects for now. New fears about losses at American banks only gave investors more reason to hold back or take profits from this year's advance.

"People are a bit cautious. A lot of money has already flowed into the markets," said Lorraine Tan, director of equities research at Standard & Poor's in Singapore. "The question now for most investors is 'do I put more in at these levels or wait for it to correct more,' because there's uncertainty out there about the strength of the U.S. recovery."

European markets fell as trading got under way, with investors showing extra caution after a car bomb exploded outside the Athens Stock Exchange. Britain's FTSE 100 fell 0.7%, while Germany's DAX and France's CAC-40 dropped 0.9%.

Wall Street futures pointed to a lower open in the U.S. on Wednesday.

In Tokyo, the Nikkei 225 stock average retreated 249.60 points, or 2.4%, to close at 10,280.46 on worries about the resurgent yen. Among the hardest hit stocks was memory-chip maker Elpida Memory, slammed over 16% after announcing plans to sell more than $800 million in new shares.

In Hong Kong, the Hang Seng lost 350.30, or 1.8%, to 19,522.00.

China offered a rare bright stop, with the Shanghai index gaining 1.2%, adding to a recovery after the country's market's plunged on Monday.

On Tuesday in the U.S., unsubstantiated rumors about growing bank losses, as well as an analyst downgrade of AIG(AIG Quote), led traders to dump financial shares, which have surged in recent weeks.

The Dow Jones Industrial Average dropped 185.68, or 2%, to 9,310.60. The S&P 500 fell 22.58, or 2.2%, to 998.04, while the Nasdaq composite index fell 40.17, or 2%, to 1,968.89.

Oil prices climbed 46 cents to $68.55 a barrel after a two-day plunge as a drop in U.S. crude inventories suggested demand may be recovering.

In currencies, the dollar fell to 92.72 yen from 92.93 yen late Tuesday, while the euro inched up to $1.4222 from $1.4219.