Asian stocks tumbled Tuesday, after Merrill Lynch, the third-largest U.S. investment bank, said it would take a $5.7 billion write down related to bad debt, draining confidence in the unstable financial sector.
Coming a day after one of Australia's top banks said it would write down more than $1 billion in credit-related losses, the news heightening fears that a year-old financial crises that knocked global stocks into bear market has further to run.
Worries that financial sector troubles will further undermine the global economy kept the dollar below Monday's one-month high versus the yen. Gold prices rose for a fourth day and Japanese government bonds surged, pushing the benchmark 10-year yield down to the lowest in three months.
Merrill Lynch said it will take a $5.7 billion third-quarter writedownas it unloads huge amounts of risky debt, and will raise $8.5 billion by selling new stock, a move that could dilute the value of existing shares. The Wall Street investment bank and brokerage announced its plans less than two weeks after posting a $4.9 billion second-quarter loss, hurt by more than $9 billion of write-downs.
Crude oil prices rose more than $1 in the New York session after militant attacks slashed Nigerian oil production and Iran stirred geopolitical tensions by suggesting it was rapidly expanding its nuclear program. U.S. crude edged higher to trade around $125 a barrel in the Asian session.
Japan's Nikkei 225 Average closed 1.5 percent lower, with financial shares sliding as worries about the U.S. credit market mounted while automakers were hurt
after Toyota Motor cut its global sales forecast. Nippon Steel slid after a fire broke out on
Tuesday at one of its plants in southwest Japan, forcing the world's second-biggest steelmaker to halt some blast furnace operations.
Seoul shares finished 2 percent down, led lower by technology issues such as LG Electronics after oil rallied and U.S. shares weakened on renewed credit worries, darkening the outlook for the sector.
Australian shares lost 1.5 percent as worries about mounting credit market losses triggered more selling among financial firms such as Commonwealth Bank of Australia.
Hong Kong shares extended their losing streak into a fourth session, giving up 1.9 percent, on heightened concerns that the year-old crises in global financial markets have yet to run their course. HSBC Holdings, slid 1.3 percent after its U.S. counterparts were mauled overnight by worries over the fallout from credit woes. Bourse operator Hong Kong Exchanges & Clearing tumbled over 4 percent after the exchange recorded its lowest turnover in nearly 16 months on Monday, ahead of the July futures expiry in Hong Kong and the release of key U.S. economic indicators.
Singapore's Straits Times Index was off its lows, down 0.8 percent, with the falls led by financials such as DBS Group and Oversea-Chinese Banking Corp. Singapore Airlines was also lower, despite reporting a smaller-than-expected 15 percent fall in quarterly profit.
Chinese stocks dropped sharply, led by financial and property shares, in response to major drops in the U.S. and Hong Kong markets as concern about the U.S. credit crisis resurfaced. The Shanghai Composite Index was down 1.8 percent with Industrial & Commercial Bank of China and property developer Vanke leading the decline.