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Asian markets tumble on US worries

Asian stock markets plunge again on the heels of Europe's worst trading day since the September 11 attacks, as fears of a US recession triggers a meltdown on bourses around the globe.

business Updated: Jan 22, 2008 12:28 IST

Asian stock markets plunged again on Tuesday on the heels of Europe's worst trading day since the September 11 attacks, as fears of a US recession triggered a meltdown on bourses around the globe.

All the region's markets were sharply down in early trade, amid growing concerns that the deteriorating situation in the United States will drag down economies big and small in every corner of the world.

Tokyo lost 4.4 per cent in morning trading, dropping to a 27-month low, while Australia was off 5.1 per cent at midday and Hong Kong opened down 5.0 per cent.

Seoul was down 3.6 per cent, Singapore opened off 3.9 per cent and other markets were also hit hard.

Global markets are now "in a chain reaction of drops," said Hiroichi Nishi, a broker at Nikko Cordial Securities in Japan.

"Fears that the US economy may slip into a recession have been growing to spawn worries over the global economy," he said.

US markets were closed on Monday but Europe saw its sharpest one-day falls since the attacks on the United States more than six years ago, with major markets off between five and seven per cent.

"The situation is serious," said the head of the International Monetary Fund, Dominique Strauss-Kahn.

"All the world's countries are suffering from the slowdown in growth in the United States -- at least all developed countries," he said.

US President George W Bush has proposed a massive stimulus package of tax breaks to boost the US economy, but the proposal has largely failed to convince jittery traders and investors.

Many said the measures were too little too late, after months of bad news about the subprime mortgage crisis as well as indicators pointing to a US recession ahead.

"People aren't buying the US bail-out story," said Richard Hunter, equities analyst at British broker Hargreaves Lansdown. "People are battening down the hatches while they see what happens in the US."

Among other effects, a major US slowdown would mean that US consumers would purchase fewer goods, including from overseas.

Japan's Nikkei Index fell below the 13,000-point level for the first time in more than two years, down 4.4 per cent after losing 3.9 per cent the previous day.

In Australia, off 5.1 per cent, traders said investors were rattled by fears about the situation in the United States and were expecting steep falls when US markets re-opened on Tuesday.

"The decline in developed economies and G7 stock markets seen so far this year has now taken on truly Asian/global dimensions," said NAB Capital senior economist David de Garis.

Elsewhere, Shanghai was off more than five per cent, Taipei shares shed more than six per cent and Malaysia dropped 3.0 per cent.