Markets tumble as recession fears heighten
Asian stocks tumbled for a second day, with South Korea’s market sinking more than 8%, as a barrage of downbeat company forecasts deepened fears of a global recession.
Every major regional benchmark was in the red. Japan’s Nikkei 225 stock average lost 558, or 6.4%, to 8,120 points, extending further losses of almost 7% a day earlier. Hong Kong’s Hang Seng Index was down 5.7% at 13,448.
Asia’s downward lurch followed Wall Street as hundreds of companies reported third-quarter results and issued murky forecasts this week, signs that the economic slowdown was taking a toll on balance sheets despite recent improvements in the world credit markets.
Tokyo investors were cautious ahead of the release of Japanese corporate earnings next week, including Canon Inc. on Monday and Honda on Tuesday.
Electronics powerhouse NEC Corp cut its earnings estimate amid an economic downturn at home and abroad.
“Sentiment is lousy,” said Dariusz Kowalczyk, chief investment strategist at CFC Seymour in Hong Kong.
“Earnings are disappointing, and we’re still in the process of lowering profits all across the globe.”
In South Korea, the Kospi plummeted 8.8% to 1,034, along with another steep slide in the country’s currency, the won. The Kospi has slid 45% so far this year after rising 32% last year, its fourth double-digit gain in five years.
Australia’s key index pulled back 4% as slumping world commodity prices sent resource companies such as BHP Billiton and Rio Tinto Group sharply lower.
Overnight in New York, the Dow fell 514.45, or 5.69%, to 8,519.21, after being down as much as 698 points in the final half hour of trading. The Standard & Poor’s 500 index was the worst performer among the major indexes with a 6.1% drop that left it at its lowest level since April 2003.
Oil rebounded modestly after plummeting more than 5 US dollars overnight to settle below 67 dollars a barrel near 16-month lows. In Asian trade Thursday, light, sweet crude for December delivery was trading hands at $67.43, up 68 cents.
In currencies, the dollar weakened further to 97.55 yen from 97.70 late yesterday in New York.
In Hong Kong, the territory’s interbank offered rate, also known as Hibor, for three-month loans rose slightly to 3.24 from 3.14 after falling in recent days.
Yesterday, Latin American stocks were hammered as Argentina’s move on its private pension funds sparked fears of a default that could boost risk in all emerging economies.
Argentina’s benchmark Merval stock index plunged 10.1% to close at 941 as investors worried that the proposal would drain companies’ access to private capital.
The index has lost 20 % since Tuesday morning, when President Cristina Fernandez’s plans to take over $30bn dollars in private pension fund assets were made public. Argentina’s congress is likely to approve the nationalisation within weeks.
Brazil’s benchmark Ibovespa index closed down 10.2% at 35,070. Mexico’s IPC index sank 7% to 18,787, its biggest loss since 2000, amid continued fears of large currency derivatives losses.
In Europe, Britain’s FTSE 100 index of leading shares closed down 189.84 points, or 4.5%, to 4,040.89 on Wednesday, while Germany’s DAX fell 213.34 points, or 4.5%, at 4,571.07. The CAC-40 in France ended 177.22 points, or 5.1%, lower at 3,298.18.
