Asian stocks fall on fears of US-led slowdown

Alex Kennedy ,  The Associated Press ,  Singapore   |  Fri, 10/03/2008 11:23 AM  |  Business

Asian markets fell Friday in the wake of another plunge on Wall Street amid doubts that Washington's bank bailout plan - even if it passes - will prevent a recession in the U.S. and a slump around the world.

Japan's benchmark Nikkei 225 stock average was down 1.6 percent at 10,982, while Hong Kong's Hang Seng index slid 2.3 percent to 17,790.

Virtually all Asian markets were in the red - Australia, Singapore, Taiwan, Malaysia and Thailand.

The outcome of a vote later Friday in the U.S. House of Representatives on the US$700 billion bank rescue plan is still uncertain. The Senate overwhelmingly approved a revised version of the bill Wednesday after the House rejected the original plan on Monday.

But even if the package is approved, investors in Asia are pessimistic about the outlook for the U.S. economy - a vital export market - and realize that cleaning up the bad debt mess at the core of the global credit crisis will take a long time.

"The bailout could move us toward a solution, but there are many unresolved issues," said Tim Rocks, Asia strategist at Macquarie Securities in Hong Kong. "We're starting to see the first evidence that the U.S. economy is starting to suffer, and this will have an impact on Asia exports through next year."

Wall Street took a dive Thursday as numbers from the U.S. Labor Department showed that initial claims for jobless benefits increased by 1,000 to a seasonally adjusted 497,000, a seven-year high and significantly above analysts' estimates of 475,000.

Also, the Commerce Department said that U.S. factory orders in August dropped 4 percent compared to July, a much steeper decline than the 2.5 percent drop analysts expected and the biggest setback since a 4.8 percent plunge in October 2006.

Japanese automakers sank for a second day Friday after the industry reported September sales plunged in the U.S. - their biggest overseas market.

Shares of Toyota Motor Corp. fell 6.3 percent after the world's second-biggest carmaker said Wednesday that U.S. sales fell 32 percent. Nissan Motor Co. and Honda Motor Co., which also reported a large drop in U.S. sales, both fell for a second day.

Rocks said he expects Asian technology, shipping and steel industries to struggle as U.S. consumer demand for Asian exports weakens.

"All the big export sectors are the most at risk," Rocks said. "This is not a good scenario any way you look at it for Asia for next year."

On Thursday, the Dow Jones industrial average fell 348.22, or 3.22 percent, to 10,482.85. European and Latin American shares fell Thursday as well.

U.S. stock market futures were up modestly, suggesting Wall Street would open slightly higher.

The dollar edged up to 105.23 yen from 104.97 late Thursday in New York. The euro climbed to US$1.3853.

Oil prices dipped after tumbling in New York trading. Light, sweet crude for November delivery was down 57 cents to US$93.40 a barrel in electronic trading on the New York Mercantile Exchange.

Markets in mainland China, South Korea and Indonesia were closed for national holidays.

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