Profit warnings send Asian markets plunging

Japan’s Nikkei index tumbled nearly 7% today as Asian markets plunged over spreading pessimism about the world economy.

As credit markets show signs of improving, investors were turning their attention to dismal forecasts from major US companies and Japanese media reports of disappointing sales and profit results.

Asian markets opened lower after an overnight decline on Wall Street, but extended losses as the day progressed.

Japan’s Nikkei 225 stock average fell for the first time in three days, dropping 631.56 points, or 6.79%, to 8,674.69. Hong Kong’s Hang Seng was down 6.2%, while South Korea’s main index shed 5.1%.

“The credit crunch seems to be behind us, and we are shifting focus to corporate earnings and economic conditions, and clearly both are deteriorating,” said Alex Tang, head of research at Core Pacific-Yamaichi in Hong Kong.

Particularly hard hit were Japan’s megabanks, which slumped after The Nikkei financial daily reported that Mitsubishi UFJ would miss its net profit projection for the April-September period by about two-thirds due to higher bad loan costs and the falling value of its shareholdings.

Mitsubishi UFJ Financial Group shed 8.83% too, and Sumitomo Mitsui Financial Group dived 8.01%.

A climbing yen added to the misery in Japan, dragging down exporters such as car makers and consumer electronics firms. A stronger yen reduces the value of overseas profits when repatriated to Japan.

The dollar fell to 99.57 yen in Asia, down from 100.23 yen yesterday.

Sony plunged 9.3%, Canon was down 6.1%, and Panasonic stumbled 8.4%.

South Korea’s currency, meanwhile, continued to slide against the dollar. The won fell 3.1% against the US dollar to 1,363, bringing its decline for this year to 31.3 %.

Shares of Samsung Electronics, which said it has withdrawn a 26 dollar a share bid to acquire US-based SanDisk, fell 2.1% to close at 508,000 won (€290).

Japan’s Toyota lost 6.86% amid media reports that the parent company this year will post its first decline in annual global sales in a decade.

Hurt by slowing demand worldwide as well as the global financial crisis, Japan’s largest car maker will likely sell 8.3 million units in 2008 on the parent level – excluding subsidiaries and affiliates – down from 8.43 million units in 2007, The Nikkei said without citing sources.

Fears that the US is heading into a severe recession were stoked as bellwether corporations such as chemical manufacturer DuPont, Sun Microsystems and Caterpillar downplayed their prospects for the coming months.

Yesterday, the Dow Jones industrial average fell 2.5% to 9,033.66, while the technology-heavy Nasdaq composite index shed 4.1% to 1,696.68.

Those same dismal US earnings outlooks also sent oil prices below 70 a barrel as investors shrugged off a looming Opec production cut. Light, sweet crude for December delivery dropped 2.73 dollars to 69.45 dollars a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore.

Oil prices are now less than half of their peak near 150 dollars a barrel in mid-July.

Staggering high lending rates at the heart of the credit crisis continued to fall, with the Hong Kong interbank offered rate, also known as Hibor, for three-month loans dropping to 3.14% from 3.35%.

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