Asian markets closed mostly lower Tuesday, after the U.S. Federal Reserve's decision to cut interest rates failed to shore-up investor confidence. South Korean and Australian markets managed to finish slightly higher, however.
The Fed cut its benchmark funds rate to 4.25 percent from 4.5 percent. Market players, expecting a bolder half-point move, were disappointed by the modest cut -- there were hopes for a more aggressive 50 basis point reduction.
Financial stocks bore the brunt of the selloff as worries about further credit-related losses flared up. The sector had been lifted recently by hopes that cash infusions for some big firms such as UBS would help them tide over ructions in credit markets.
Australia's top investment bank Macquarie Group, South Korea's Shinhan Financial Group, Japan's Mitsubishi UFJ and Citigroup's Tokyo shares were all sharply lower.
Japanese shares pared much of their early losses as many investors thought the sharp initial selloff following a modest Federal Reserve interest rate cut had gone a bit too far. The Nikkei 225 Average closed 0.7 percent lower. The Nikkei was down as much as 2 percent at one point of the session.