Asian markets were battered as the Nikkei plunged more than 11 percent and South Korea tumbled 9.4 percent, as oil prices dropped to a one-year low Thursday after downbeat U.S. economic data spread fears of a more protracted and sharp global slowdown than initially expected.
Optimism about the stabilisation in money markets has been swept aside and widespread selling of global equities has resumed in earnest as the quarterly results season gets underway and reports filter in about sharp losses at hedge funds.
Relative to current earnings expectations, Asian stocks are oversold. However, upcoming corporate outlooks could influence whether estimates get cut, potentially adding another weight on equities and economic prospects. Financial market volatility as investors greatly reduce their exposure to risk has weighed on the global economic outlook, which has fed back into markets in a damaging circle.
Dollar/yen hovered at the ¥100 level, while bonds soared as investors sought safer havens. Commodity prices dived, with crude oil prices hitting a 13-month low, on fears a recession would see demand reduced further. Oil futures are currently trading at the $73 a barrel in the early Asian session.
Japan's Nikkei 225 Average plummeted 11.4 percent to book its biggest one-day loss since the 1987 stock market crash on growing fears that recent bank rescue measures by world authorities will not be enough to stave off a severe recession. Tokyo shares slid across the board, with Canon and other exporters hit hard as the dollar remained weak against the yen, while trading houses were also battered as oil hit a 13-month low.
Seoul shares dived with the KOSPI closing 9.4 percent lower -- its biggest one-day percentage loss in the last seven years, on deepening losses in banking shares and steelmakers, hit by fears of a global recession and persisting market turmoil. Banks, also laden with concerns about a dollar liquidity crunch, led the slide with KB Financial Group falling 7.7 percent. Credit rating agency Standard & Poor's placed its counterparty credit ratings on major South Korean banks including Kookmin and Woori on CreditWatch with negative implications, citing the banks' ongoing foreign currency funding pressures. Exporters were hit by the growing prospect of a severe worldwide downturn, with steelmaker POSCO tumbling 10 percent and Hyundai Motor falling 14.8 percent.