Asian markets plunge amid fears of US recession

Asian stocks tumbled today as traders took their cues from Wall Street, where persistent worries about a possible US recession caused another decline in share prices on Friday.

India’s benchmark stock index dropped 4% in the first 10 minutes of trading and Hong Kong’s market sank 4.7% by midday local time. US stock index futures also were down, suggesting that shares could drop again when the market opened later in New York.

Investors around the world have been jittery for weeks about a US slump, which would probably weaken demand for exports and drag on global growth. There is also concern about a worldwide credit crunch triggered by rising defaults in risky US mortgages, which has led to mountains of bad assets at major American and European banks.

Japan’s benchmark Nikkei 225 index was down 3.1%, erasing much of its 4.1% jump from Friday. Hong Kong’s key Hang Seng Index plummeted more than 4.7%.

In mainland China, the Shanghai Composite Index was down 5.5%. Markets in South Korea, Thailand and Taiwan also declined.

“There’s a lot of uncertainty out there: uncertainty over the US economy, uncertainty over China’s economy,” said Rob Hart, an analyst with Morgan Stanley in Hong Kong.

“People are also worried about contagion in Europe. If the US slows down, will it trigger a slowdown in Europe?” he said.

European stocks fell slightly on Friday amid ongoing speculation about potential problems in the banking sector.

Last week was a tumultuous one for global markets, and it appeared the turmoil would continue.

Asian and European stocks had plunged early last week on worries about slower US growth. They rebounded after a hefty three-quarters cut in US interest rates by the Federal Reserve last Tuesday, as well as news of a US stimulus package. By Friday, markets in Hong Kong and Tokyo, for example, had nearly recovered their early week losses.

But investors in Asia dumped shares again today after Wall Street sank on Friday, when the Dow Jones industrials sliding 1.38% and the technology-heavy Nasdaq composite index declining 1.47%.

Some traders said Asian markets were dropping on concern that the Fed may not slash interest rates again – or as much as expected – when its policy planners meet tomorrow and Wednesday.

“The possibility for a 50 basis points cut is looking less likely,” said Castor Pang, a strategist at Sun Hung Kai Financial in Hong Kong, pointing to future prices in New York.

Dow futures were down 73 points, or 0.60%, to 12,163, while Nasdaq futures were down 16.5 points, or 0.92%, to 1,777.

Japanese traders were cautious ahead of announcements of corporate quarterly earnings this week, including Honda on Wednesday and Sony on Thursday.