WFC Wells Fargo and Company

Global stocks fell Wednesday, as recent declines in oil prices and a steep drop on Wall Street kept investors cautious.

The Stoxx Europe 600 was down 0.5% in early trade, adding to losses of over 2% in the previous session.

Asian shares were sharply lower as they caught up with Tuesday's falls in risky assets. Japan's Nikkei Stock Average fell 3.2%, while Australia's commodity-heavy S&P ASX 200 fell 2.3%.

Hong Kong's Hang Seng Index fell 2.4% even after data showed China's services sector picked up in January.

Investors in Europe and the U.S. had moved out of stocks Tuesday and into government bonds after U.S. crude futures suffered their deepest two-day fall since the financial crisis.

"There's an abundance of caution in equity markets," said Jeff Moser, portfolio manager at the Wells Fargo Large Cap Core Fund.

Brent crude oil was last up 0.1% at $32.76 a barrel, but remains down nearly 9% for the week, sparking concerns about the health of the global economy.

In theory, lower oil prices should be good for many developed stock markets, economists argue, as consumers save on gas and spend their discretionary income elsewhere.

The problem is "there's been an inexplicable reticence or slowness on the part of consumers to spend that discretionary income," said Mr. Moser.

Meanwhile, downbeat results from some of the world's biggest oil producers and weakness in oil-dependent economies have worried investors, who are now positioning themselves for a higher chance of a U.S. recession this year.

"Still, as long as there are supports for households and consumers, it's extremely unlikely there's a [U.S.] recession," said Patrick Zweifel, chief economist at Pictet Asset Management. Mr. Zweifel is downgrading his U.S. growth forecast slightly this year but believes an outright recession is unlikely given that economic weakness in the U.S. is concentrated in the industrial sector.

In currencies, the dollar was last up 0.1% against the yen at ¥ 119.9360 after Bank of Japan Governor Haruhiko Kuroda said the central bank has "ample room" to ramp up its easing measures. The euro was down 0.1% against the dollar at $1.0915.

In corporate news, Swiss pesticide and seed company Syngenta agreed to a $43 billion takeover by China National Chemical Corp. Syngenta shares were up 6.6%.

Spot gold trading in London was down 0.2% at $1,125.28 an ounce.

Write to Riva Gold at riva.gold@wsj.com

(END) Dow Jones Newswires

February 03, 2016 04:45 ET (09:45 GMT)

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