Singapore: Asian stocks tumbled as much as 4% on Friday on growing fears that the US economy was sliding into recession and as some European lenders faced short-term funding strains, raising fears of a systemic banking crisis on the continent.
Gold jumped to a fresh high of $1,836.46 an ounce and US Treasuries surged as investors rushed into safe-havens after heavy losses on US and European markets overnight.
The precious metal has gained about $350 per ounce since 1 July as investors recoiled from riskier assets.
S&P 500 futures fell 0.8% in Asia, adding to a slump of nearly 4.5% overnight and pointing to more losses for battered Western markets later in the day.
The MSCI global stock index fell 0.6%, taking its losses since late July to around 15%.
European equities suffered their biggest daily slide in 2-years on Thursday.
In Asia on Friday, Japan’s Nikkei 225 index fell 2.1% for a third day of declines, while stocks elsewhere in Asia as measured by MSCI lost 2.9%, taking their losses to nearly 15% in August.
But pressure on markets with more exposure to hi-tech shares was more intense, with Korea’s KOSPI tumbling more than 4% and Taiwan down 2.7 %.
Several global industry heavyweights such as Dell , Hewlett-Packard and LG Electronics have cut sales forecasts this week as the outlook for corporate, government and consumer tech spending dims.
A drop in factory activity in the US Mid-Atlantic region to the lowest level since March 2009 stunned investors, as the data from the Philadelphia Federal Reserve Bank is viewed as a forward-looking indicator of national manufacturing.
“Investors have been spooked by these data. They are now focusing on next week’s data such as US GDP,” said Yumi Nishimura, a senior market analyst at Daiwa Securities.
“Retail investors may buy defensive stocks on dips, but such buying may not have an impact on the overall index.”
An unexpected fall in existing US home sales in July and a greater-than-expected rise in new claims for jobless benefits in the latest week also added to fears that the US economic recovery could stall and possibly slide into recession.
In Europe, renewed fears that the euro zone debt crisis could infect the region’s financial system put pressure on short-term funding markets, forcing some European banks to pay higher rates for US dollar loans and reviving memories of the dark days of late 2009 after the collapse of US investment bank Lehman Brothers as funding dried up.
The US dollar was flat in Asia after earlier modest gains as investors piled into the safety of US Treasuries despite falling yields.
US 30-year Treasuries surged more than a full point in Asia, with traders saying the papers were getting an added boost from vague rumours about an emergency Fed meeting later on Friday.
US crude oil futures fell almost 2% over fears energy demand will be hit by slower economic growth.