Tokyo: Asian stocks tumbled on 10 March 2008 with Tokyo hitting a 30-month low as recession alarm bells rang louder in the United States following a shock drop in employment, dealers said.
They said the big worry now is that exports to the United States will slump, curbing growth around the region and possibly dragging Japan into recession.
Political worries added to the gloom with trading in Kuala Lumpur suspended for an hour as shares plunged 10% after Malaysia’s ruling coalition suffered its worst-ever result in weekend elections.
Tokyo’s benchmark Nikkei-225 index slid 1.96% to the lowest level since September 2005 amid concerns about the impact of weaker US consumer demand and a stronger yen on exports.
“Japan’s economy lacks a domestic driving force,” said Tomoko Fujii, the head of economics and strategy for Japan at Bank of America.
“So a US recession-like state is boding ill for Japan’s business cycle,” she added.
Shanghai share prices fell 3.59% as inflation concerns and weakness in overseas markets rattled investors.
It was a similar picture elsewhere in the region as Manila plunged 4.0 %, Seoul lost 2.3%, Taipei dropped 2.7%, Hong Kong shed 1.0 % and Sydney fell 1.6% the lowest level since October 2006.
“With US employment now falling for two months in a row, it’s now almost certain that the US economy is in recession,” said Shane Oliver, the head of investment strategy and chief economist at AMP Capital Investors in Sydney.
“A slump in US consumer spending, which is now looking highly likely, will also place much greater downward pressure on growth in the rest of the world, including in China and Asia,” he said.
Investors took their cue from New York where stocks fell for a second straight session on 7 March, with the Dow Jones index tumbling 1.21% to its lowest close since October 2006.
The US economy lost 63,000 jobs in February, the steepest drop since March 2003, defying market forecasts for a gain of 25,000 jobs, official data showed on 7 March.
The Federal Reserve announced a plan to inject up to $200 billion into the financial system but the move did little to calm investors’ nerves.
“It seems that nothing is working right in the US. The economy is going from bad to worse,” said Francis Lun at Fulbright Securities in Hong Kong.
There is growing speculation that the Fed will slash its federal funds rate by 75 basis points at its 18 March meeting to 2.25%. Some analysts are even expecting an emergency cut before the scheduled meeting.
“The US economy is in a terrible state and there is a chance the Fed will cut rates before the meeting next week,” said Mark Wan, chief analyst at Hang Seng Investment Services Ltd.
European stock markets also fell in early trade Monday, with bourses in London, Frankfurt and Paris all down shortly after opening.