Stocks off 5 pct, yen surges as crisis spirals
Asian stocks dropped by around 5 percent on Monday, led by exporters, and the yen surged to a 2-year high against the euro as investors doubted a scattered European response to the financial crisis and a $700 billion (398.3 billion pound) U.S. bank bailout could prevent a deeper slump in the global economy.
Stocks hurt by signs of U.S. recessionThe need for stability drove up U.S. and Japanese government bond prices, especially after a report on Friday showed the U.S. economy in September shed the most jobs in 5-years.
Major European stock markets were expected to open as much as 4.7 percent lower, according to financial bookmakers, after Germany had to scramble to organise a rescue deal for lender Hypo Real Estate after an initial deal crumbled. The euro dropped to a 13-month low against the dollar below $1.36.
JPMorgan and UBS economists have already predicted the world economy will slip into recession next year, using a common definition of annual growth in global gross domestic product at or below 2.5 percent.
Saul Eslake, chief economist with ANZ Bank in Sydney, does not predict a world recession but sees it as a growing risk.
"The fact that a lot of emerging market economies run current account surpluses insulates them to a degree from the consequences of what's going on in the global financial system," he said. "But they have real economy leakages through their exports and that means they have not decoupled and never were."
Japan's Nikkei share average ended down 4.25 percent, at its lowest close since February 2004. Sectors that derive their revenues mainly from exports, such as electrical equipment, machinery and auto makers, led the index lower.
The MSCI index of Asia-Pacific stocks outside Japan slid 5.35 percent to the lowest since December 2005.
Hong Kong's Hang Seng index was down 3.35 percent, with shares of China Mobile, China Construction Bank and HSBC paving the way lower.
"There's just nothing positive out there. Figures are bad in the States, Europe's bad, Japan's bad and China's probably slowing," said David Spry, research manager at broker FW Holst in Melbourne.
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