S&P Futures and Global Markets Decline

Market action in recent days has represented a partial reversal of what analysts and investors dub the “reflation trade,” a bet on companies and assets that stand to do best in an environment of solid economic expansion and quickening inflation.

Last week, the Federal Reserve signaled that it could raise interest rates sooner than previously forecast, helping drive the Dow Jones Industrial Average to its worst week in nearly eight months.

In regional markets, Japan’s Nikkei 225 fell 3.8%, while Australia’s S&P/ASX 200 dropped 1.6% and Hong Kong’s Hang Seng decreased by more than 1%. China’s Shanghai Composite was little changed, down 0.1%.

In Europe, the pan-continental Stoxx Europe 600 fell 0.6%, led by declines in the basic resources, travel and banking sectors.

The yield on the benchmark 10-year Treasury note fell to 1.39% from 1.44% in the previous session, according to Tradeweb, putting the U.S. government bond benchmark on course for its lowest closing yield since late February. Bond yields fall as prices rise.

Investors were adjusting to the Fed’s shifting tone, said Paul Sandhu, head of multiasset quant solutions for Asia-Pacific at BNP Paribas Asset Management.

“We will see this type of volatility come up again and again; the inflation discussion is not going away,” Mr. Sandhu said.

Financial stocks were among the biggest losers. Banks can typically make bigger profits on lending when bond yields are higher. By early afternoon in Hong Kong, HSBC Holdings’ Hong Kong-listed shares had fallen 3.7% and Japan’s Mitsubishi UFJ Financial Group dropped 2.8%.

Shares in Commonwealth Bank of Australia, which on Monday unveiled a deal to sell its domestic general-insurance business, retreated 4.9%.

Write to Frances Yoon at frances.yoon@wsj.com