Asian stocks markets are stabilising after a day of dramatic plunges as futures point to a measure of calm returning to Wall Street following the Dow’s sixth worst decline in the last 112 years.
To be sure, investors remained on edge amid fears of a possible global recession. But by mid-afternoon, major Asian indexes had pulled back from a dizzying tailspin earlier in the day.
South Korea’s Kospi was off 3.6 per cent at 1801.35 after plummeting nearly 10 per cent in the morning. Hong Kong’s Hang Seng, which fell as much as 7 per cent, was down 2.9 per cent at 19,890.85 and Japan’s Nikkei 225 stock average pulled back to a fall of 1.7 per cent.
Australia’s S&P/ASX 200 index moved into positive territory - up 1.2 per cent at 4034.80 - and mainland China’s key indexes eked out modest gains.
The big moves, which added to sharp losses in the past few days, came after the Dow Jones industrials fell 634.76 points on Monday. It was Wall Street’s first day of trading after Standard & Poor’s downgrade of the US credit rating - which jolted the global financial system and reinforced anxiety that the US economic recovery is stalling.
Futures suggested US stocks might eke out slight gains on Tuesday. Dow futures were up 6 points, or 0.1 per cent, at 10,730 and broader S&P 500 futures added one point, or 0.1 per cent, to 1112.30.
‘‘It’s still very hard to predict how the US market will do,’’ said Jackson Wong, vice president of Tanrich Securities in Hong Kong. ‘‘When the dust settles, if the situation doesn’t get worse in the US or Europe, the situation will rebound. But the US has to stabilise.’’
Worries about the US economic recovery have been building since the government said that economic growth was far weaker in the first half of 2011 than economists expected. Intensifying concerns were reports showing that the manufacturing and services industries barely grew in July, although job growth was better than economists expected last month.
Investors are also worried that Italy and Spain could become the next European countries to have trouble repaying their debts. Greece, Ireland and Portugal have already received bailout loans because of Europe’s 21-month-old debt crisis.
The fears have pushed investors to shun Spanish and Italian bonds, which have led to higher yields and in even higher borrowing costs for the two countries.
The European Central Bank stepped in on Monday and bought billions of euros worth of their bonds. The move helped to lower yields on Spanish and Italian bonds, at least temporarily.
Benchmark oil for September delivery was down $US2.51 to $US78.80 a barrel in electronic trading on the New York Mercantile Exchange. That is the lowest settlement price of the year for crude, but it’s still higher than the $US71.63 per barrel low of the past 12 months. Oil hit that on August 24 of last year, when a combination of disappointing economic news and abundant supplies drove down prices.
Crude fell $US5.57, or 6.4 per cent, to settle at $US81.31 per barrel on the Nymex on Monday.
In currencies, the US dollar weakened to 77.29 yen from 77.70 yen late on Monday in New York. The euro rose to $US1.4214 from $US1.4196.