President Barack Obama's speech, which gave few new details on how he will tackle the banking crisis and flagging economy, helped push stocks lower. Photo / AP

President Barack Obama's speech, which gave few new details on how he will tackle the banking crisis and flagging economy, helped push stocks lower. Photo / AP

Words of hope from the new American President could do nothing to lift the fearful mood of world stockmarkets yesterday as concerns about the banking sector deepened.

Even as Barack Obama delivered his inauguration speech to the gathered masses in Washington, Wall Street traders were dumping banking stocks.

State Street - the world's biggest institutional asset manager - posted big losses in its commercial paper programme and investment portfolio and plunged 59 per cent, Citigroup fell 20 per cent and Bank of America lost 29 per cent. The ailing Royal Bank of Scotland fell 69 per cent in New York trading.

The sell-off pushed the benchmark Dow Jones index down 4 per cent - the biggest Inauguration Day drop in history. The S&P 500 closed down 5.3 per cent and the tech-heavy Nasdaq index closed down 5.8 per cent.

The negativity flowed around the globe with Japan's Nikkei falling 2 per cent Hong Kong's Hang Seng falling ****. Australia's ASX200 was down 1 per cent.

In New Zealand the NZX-50, which has little real exposure to the banking sector, fell just 0.2 per cent.

Disappointment with Obama's inauguration speech, which laid out few new details on how his administration will tackle the banking crisis and flagging economy, helped push stocks lower.

Richard Cripps, chief market strategist for Stifel Nicolaus, said the market's decline was interrupted briefly by Obama's inauguration speech but that the markets then continued to trade on the problems in the financial sector.

"There's just tremendous fear and uncertainty in the banking sector," Cripps said. "Even those closest to the issue, like executives and analysts, there's a feeling of tremendous uncertainty. They're not giving any positive guidance because they just don't know. Lacking that [certainty] we're left to our worst fears, and that's what you're looking at with bank stocks."

"People still have expectations for his economic policies, but we know nothing concrete about them, so the market has no choice but to focus on the real economy and earnings," said Yutaka Miura, chief technical analyst at Shinko Securities in Tokyo.

But other market players said hopes that helped power a global stock rally around the New Year had been unrealistic.

"As for Obama, perhaps you can say his impact has worn off, but soon he'll actually start carrying out his policies and we'll start seeing a reaction to what he really does," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.