Asian stockmarkets caught a global selling fever after new warnings of world recession and as fears grew over the future of European banks with heavy exposure to sovereign debt.
Friday’s investors in Tokyo, Seoul and Sydney picked up on the mounting anxiety evident in the United States and Europe, where the markets saw fresh carnage on Thursday.
Adding to woes in the region were fears that a slowdown in the galloping growth seen in China - a key driver of the world economy - could hit equities.
‘‘The bears returned aggressively overnight as very disappointing US economic data and fears over the stability of European banks had traders reaching for the sell button,’’ IG Markets analyst Ben Potter said in Australia.
‘‘It looks like we’re set for a very ugly end to the week as fear and panic-driven trade once again dominate the market,’’ he said. ‘‘We could have the added pressure of traders looking to close their positions ahead of the weekend given the high levels of uncertainty.’’
By the lunch break, the headline index at the Tokyo Stock Exchange had lost 2.15 per cent, shedding 192.09 points to 8751.67, with financial shares particularly in the firing line.
In Seoul, the benchmark KOSPI plunged a hefty 4.49 per cent to 1,777.13 by the break with South Korean exporters such as Samsung Electronics and Hyundai Motor hit hard.
The worldwide selloff came after Wall Street investment bank Morgan Stanley warned that the US and eurozone economies were ‘‘dangerously close’’ to a double-dip recession.
Stocks were further punished by a fresh round of gloomy economic data from the United States such as jobless claims, and growing doubts about the ability of European banks to withstand the 17-nation euro-zone’s debt crisis.
The Dow Jones Industrial Average was down 3.7 per cent at the closing bell, while the broader S&P 500 slumped 4.5 per cent and the tech-heavy Nasdaq Composite plummeted 5.2 per cent.
Losses were even worse in Europe on Thursday, as London stocks closed down 4.5 per cent, Paris fell 5.5 per cent and Frankfurt dropped 5.8 per cent.
Oil prices slumped as traders fretted that an economic downturn could erode global energy demand. Early in Asia, West Texas Intermediate crude for delivery in September was down $US1.05 from its New York close at $US81.33 a barrel.
Gold and US Treasury bonds - both safe havens in times of trouble - broke record ground with bullion reaching $US1,837.50 per ounce on the Hong Kong spot market from a previous high of $US1,826.10 in New York.
A report in The Wall Street Journal that the US Federal Reserve was worried about the liquidity of major European banks contributed to the selloffs in European markets.
French lenders came under especially intense pressure, with Societe Generale losing more than 12 per cent.