By Jon Sindreu

Global stocks drifted into slight losses Wednesday, but renewed declines in bond prices suggest that risk appetite is still holding up after Donald Trump's victory in last week's U.S. election.

The Dow Jones Industrial Average fell 53 points, or 0.3%, to 18870, after closing at an all-time high for the fourth day in a row. The S&P 500 fell 0.3% and the Nasdaq Composite slipped 0.4%.

In Europe, the Stoxx Europe 600 reversed morning gains and fell about 0.5%, as banks retraced some of last week's rally. The financial sector did boost Asian stock markets, however, with the Japanese Nikkei 225 closing 1.1% higher.

Nevertheless, bond prices continued to fall after a brief respite Tuesday. The 10-year Treasury yield edged up to 2.248%. Yields on German and U.K. 10-year debt, which move opposite to prices, rose to 0.317% and 1.402%, respectively.

The bond selloff is a telltale sign that financial markets may still be broadly positive about risky assets, continuing the course they charted after the U.S. presidential election last week. The expectation that inflation will pick up under a Trump administration has hurt bonds, because it means central banks may need to start reversing years of ultraloose policies, which have been a boon for fixed income.

Although most investors are gloomy about the impact that Mr. Trump's protectionist policies may have on the global economy, his pledges to slash taxes and ramp up infrastructure spending, as well as scrapping President Barack Obama's health-care reform, have provided a boost to the stock market. Sectors that stand to gain from these plans, such as engineering and pharmaceutical companies, have been key beneficiaries.

"Markets are currently optimistic about Trump's fiscal expansion in the U.S. next year, and downplaying risks of a more deflationary protectionist policy mix. This might be right," said Rob Carnell, London-based analyst at Dutch bank ING. "That said, it places most of the risk on the downside, should expansion take longer to materialize than expected, or protectionism rear up more strongly than anticipated."

Steeper yield curves have also provided a helping hand to banks, whose business model is based on borrowing short term and lending long term. Meanwhile, stocks considered as safer bond proxies for their steady income, such as utilities, are down since the election.

Copper and aluminum prices, which are regarded as gauges of global demand, fell by about 2% and 3% respectively Wednesday, but this was after reaching one-year highs last week. Oil prices also retreated, with U.S.crude trading 0.7% lower at $45.47 a barrel.

The question for investors now is how long the bond selloff can continue before more concrete details about Mr. Trump's policies emerge.

"Our view is that rates have room to go higher," said Annika Eiremo, a fund manager at Janus Capital Group Inc., a company with $195 billion under management. Still, "it's still early stages of a very uncertain time period in terms of what policy will be," she said.

According to Markus Allenspach, head of fixed-income research at Swiss private bank Julius Baer, Mr. Trump's concessions to the Republican Party's establishment -- like the selection of Republican National Committee Chairman Reince Priebus as his chief of staff -- and stimulatory policies by central banks in Europe and Japan are likely to limit how low bonds can go.

"I wouldn't rule out that we now have a period of consolidation," he said.

Financial markets' optimistic reaction to the outcome of the election seems to cleared the way for the U.S. Federal Reserve to nudge up interest rates in its long-awaited December policy meeting. Derivatives currently point to a 91% chance this will happen, compared with 86% Tuesday. A positive earnings season during the third quarter reinforces the case for tighter monetary policy, investors say.

"I think markets are putting the Fed in a place where it has to raise [interest rates]," said Jamie Cox, managing director for Virginia-based Harris Financial Group. "The Fed would probably prefer not to, but it has no choice with fiscal policy in the horizon."

Expectations of higher interest rates have pushed up the U.S. dollar. According to the WSJ Dollar Index, which measures it against a basket of 16 other currencies, the dollar is at its strongest levels since February.

On Wednesday, it was up 0.3% against the Japanese yen. By contrast, the Turkish lira reached fornew all-time lows, with other emerging-market currencies like the Russian ruble and the Indonesian rupiah sinking as well.

Higher yields in advanced economies usually drive investors away for assets in developing nations, which have enjoyed a powerful rally during the market turmoil of the last few months.

Aaron Kuriloff contributed to this article.

Write to Jon Sindreu at jon.sindreu@wsj.com

(END) Dow Jones Newswires

November 16, 2016 10:07 ET (15:07 GMT)

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