Hong Kong: A rout in Asia pushed world stocks to their lowest in 5 years on Thursday, while oil fell to below $53 a barrel and government bonds surged as economic data indicated a global recession could get even uglier.
Investors are bracing for tough conditions ahead after the latest bearish signals for the global economy: The Federal Reserve slashed its US growth forecasts, US consumer prices fell at a record pace last month, and Japan’s October exports fell by the most in seven years.
The bleak outlook, which is hitting sectors from South Korean chip makers to US auto makers, comes amid renewed worries about the global financial system. Citigroup shares tumbled to a 13-year low on Wednesday as investors questioned survival prospects..
“Everybody is accepting the fact that we are in for a prolonged global recession and we are seeing a lot of pullbacks,” said Lucinda Chan, a division director with Macquarie Equities in Australia.
Like dominoes, Asian markets fell a day after US stocks hit their lowest in more than five years. The MSCI All-Country World Index was down 0.7% at 0200 GMT, having hit its lowest level since May 2003.
The rout was especially pronounced in Japan, where the Nikkei average dropped 4.3%, and below the key technical level of 8,000 points for the first time in three weeks.
South Korean shares tumbled more than 4% too, while markets from Sydney to Singapore and Taiwan fell between 1-3% each.
Oil prices meanwhile dropped for a fifth straight session to below $53 a barrel.
Oil on Wednesday fell to its lowest settlment since late January 2007 as investors expect a sharp slowdown in demand for a commodity that just in July hit a record high at about $147 a barrel.
Investors are finding plenty to worry about. Federal Reserve officials on Wednesday pared their outlook for growth in the world’s biggest economy to minimal levels.
The weaker forecast came on a day in which data showed US consumer prices in October posted their biggest drop since monthly records began in 1947, while new-home buildings slumped to fresh lows.
The sharply weaker growth in the United States and most of Europe bodes ill for Asian economies that need healthy overseas demand for their products. Japan on Thursday said exports logged their biggest annual decline in seven years in October.
The worrisome outlook sent regional bonds surging as investors sought safety.