Heightened geopolitical tensions over the North Korean nuclear threat dragged Singapore shares into negative territory for a second session, as global leaders struggled to agree on how to deal with the renegade state.
The Straits Times Index slipped 0.58 per cent or 18.79 points to 3,232.47, weighed down by all three banks as doubts grew over the likelihood of another United States interest-rate hike this year.
DBS Group lost 1.16 per cent or 24 cents to $20.45; OCBC Bank shed 1.1 per cent or 12 cents to $10.96; United Overseas Bank fell nearly 1 per cent or 23 cents to $23.50.
Federal Reserve Governor Lael Brainard said US inflation was "well short" of target, so the Fed should be cautious about raising rates. Ms Brainard, a permanent voting member on the Fed's monetary policy committee, previously convinced colleagues to delay tightening.
Investors are awaiting the Fed policymakers' next meeting on Sept 19-20, which is due to release economic forecasts that could signal the prospect of rate hikes ahead.
Also on traders' radar is the European Central Bank's decision at its policy meeting today on whether to extend or wind down asset purchases next year.
Local stocks lost ground after a top North Korean diplomat warned that the country was ready to send "more gift packages" to the US as world powers struggled for a response to Pyongyang's latest nuclear weapons test.
"We expect August's market choppiness to continue into September because of uncertainty over central bank's policy actions, escalating geopolitical tensions in the Korean peninsula and a lacklustre second quarter results season," DBS Group Research said.
Property counters took a beating. Hongkong Land shed 1.2 per cent or nine US cents to US$7.27; CapitaLand fell 1.3 per cent or five cents to $3.70, and City Developments slid 1.7 per cent or 20 cents to $11.58.
Meanwhile, Singapore Airlines (SIA) fell 0.5 per cent or five cents to $10.23, on concerns that increased capacity on some of its key routes could hurt its yields.
Qantas Airways recently announced the extension of its partnership with Emirates for another five years with key changes from March 25 next year.
According to OCBC, the extended partnership could have an impact on SIA.
"For SIA's domestic market, its customers now have an additional airline, Qantas, to choose from when flying between Singapore - London/Sydney/Melbourne. We expect pressure on yields on these routes to increase ahead," it said.
Rowsley was the most actively traded penny, up 0.9 per cent or 0.1 cent to 11.3 cents on trade of 76.8 million shares. Yangzijiang Shipbuilding gained 1.4 per cent or two cents to $1.435 on volume of 39.3 million shares. Genting Singapore shed 0.9 per cent or one cent to $1.15, with 28.8 million shares traded.