Seoul: Asian and European markets tumbled on Monday as investors reacted nervously to a steep decline on Wall Street on Friday after disappointing economic and corporate news rekindled worries about a US recession.
Japan’s benchmark Nikkei 225 index plunged 4.5% to close at 12,992.18. Markets in Hong Kong, South Korea, India and Australia also fell sharply, but shares in mainland China advanced.
The declines spread into early European trading, and the US stock index futures also were down, suggesting Wall Street was poised for another drop on Monday.
Investors dumped stocks after a series of depressing economic and earnings reports on Friday out of the US — a vital export market and the world’s largest economy — sent the Dow Jones Industrial Average falling 315.79, or 2.51%, to 12,266.39.
The bad news included poor quarterly results from American International Group Inc. and Dell Inc. and weaker than expected results on the Chicago purchasing managers index, which painted a dreary picture of manufacturing. “It’s all due to fears of a recession in the US,” said Commonwealth Securities Ltd’s chief equities economist Craig James in Sydney, Australia. “This is a global market sell-off.”
The dollar’s drop to a three-year low against the yen also weighed on sentiment in Tokyo as dollar weakness erodes overseas earnings at Japan’s key exporters. The dollar fell as low as 102.59 yen before recovering some to 103.10 yen — down from 103.96 yen on Friday in New York.
Asian markets, which have fallen much of the year so far, had staged a modest recovery through the middle of last week, with Tokyo’s Nikkei climbing to a seven-week high last Wednesday.
But pessimism returned on Monday, sending Hong Kong’s Hang Seng index down 3.1% to close at 23,584.97. India’s benchmark Sensex tumbled more than 900 points, or 5.12%, to close a 16,677.88.
In Europe, too, markets sank. The UK’s benchmark FTSE 100 fell 1.4% to 5,802.4, while Germany’s DAX Index declined 1.5% to 6,644.31. France’s CAC 40 slipped 1.4% to 4,723.
US economic growth slowed to a 0.6% pace in the fourth quarter and some analysts believe the economy is already shrinking.
“The biggest economy in the world is mired in recession and everybody suffers,” said Francis Lun, a general manager at Fulbright Securities Ltd in Hong Kong, summing up regional feelings.
Testifying before Congress last week, US Federal Reserve chairperson Ben Bernanke signalled that the central bank sees weak growth as the main threat and is prepared to further cut interest rates.
Hours before Wall Street was to resume trading, Dow index futures were down 80 points, or 0.65%, to 12,204, while Standard & Poor’s 500 futures were down 5.1 points, or 0.4%, to 1,326.2.
Global investors are bracing for two key US economic reports due this week. Monday’s release of the Institute for Supply Management manufacturing survey report and Friday’s jobs numbers. On average, economists are forecasting a slight increase in non-farm payrolls, but many believe they will decline for a second straight month.
Markets in China, however, defied the downward trend. The Shanghai Composite Index rose 2.1% to close at 4,438.27, on expectations of possible market-boosting measures from the national legislative session, beginning this week.
Carl Freire in Tokyo and Elaine Kurtenbach in Shanghai contributed to this story.