Japan’s key stock index today plummeted more than 11% – the biggest one-day loss in 21 years – as sobering reports on the US economy intensified recession fears.
The benchmark Nikkei 225 stock average nose-dived 1,089.02 points, or 11.41%, to close at 8,458.45, marking the biggest one-day percentage drop since the stock market crash of October 1987.
The broader Topix index also lost 9.52% to finish at 864.52.
The heavy selling in Tokyo comes after the Dow Jones industrial average plunged 7.8% yesterday as worried investors dumped shares on sobering reports on the US economy.
“The massive sell-off on Wall Street triggered another selling in Tokyo,” said market analyst Kazuki Miyazawa. “But what really depressed the US and Japanese markets is growing fears of a global recession.”
The Nikkei index shed 9.55% in the morning session and extended losses further in the afternoon session as investors worried that the US economy was heading for a recession.
“The biggest reason for (today’s) decline is the market fear about the US economy. Investors thought they just climbed down a mountain and found another one in front of them,” said Shinichi Ichikawa, chief strategist at Credit Suisse.
“Right now, fears are mounting, and the market psychology is extremely negative,” Mr Ichikawa said.
The Nikkei’s plunge nearly wiped out its earlier gains this week when the index soared more than 14% as investors cheered widespread government efforts to shore up the world’s battered financial system.
Recession fears intensified as the US Commerce Department report showed US retail sales fell 1.2% in September – almost double the 0.7% decline analysts expected.
The figure was yet another grim indicator showing a slowdown in the world’s largest economy as consumer spending alone accounts for more than two-thirds of US economic activity.
The massive selling in New York, which pushed the Dow down 733.08, or 7.87%, its second-largest point loss ever, also accelerated as the US Federal Reserve Chairman Ben Bernanke warned in a speech yesterday that patching up the credit markets would not provide an instantaneous jolt to the economy.
Export-linked shares were hit hard in Tokyo on growing worries over a prolonged slump in the US economy, a key export market for Japan.
Japan’s top car maker Toyota lost 9.3% to 3,310 yen, while Honda dropped 10.2% to 2,115 yen.
Sony plunged 12.9 % to 2,320 yen.
Banking giant Mizuho Financial Group lost 12.7% to 343,000 yen. Japan’s largest brokerage, Nomura Holdings shed 14% to 1,215 yen.
Trading was suspended in Russian stocks after sharp falls accelerated over fears for the domestic banking sector and plunging oil prices.
The Micex suspended trading for one hour at 11.05am (0705 GMT) after shares plummeted within the first hour by 6.2% to 647.2 points. The RTS, which continued to trade, fell 6.5% to 738.1 points by 11.15am local time.
Urals oil dropped below 70 dollars a barrel – deemed by analysts as a critical level.
China’s key Shanghai Composite Index fell 4.3%, tracking declines in other world markets. The Shanghai benchmark lost 84.73 points to close at 1,909.94 on Thursday.
The Shanghai index is down nearly 70% from the record high of 6,124.04 it reached exactly a year ago.