Stocks in Japan and Australia fell Wednesday after a report showed the U.S. economy shrank by the most since 2001, underscoring sharply slowing global demand, while South Korean shares were boosted by steelmakers after BHP Billiton killed its bid for Rio Tinto.
Wall Street stocks rallied after the Federal Reserve unveiled an $800 billion effort to heal the U.S. mortgage market and to aid consumer lending, with Washington racking up a staggering $8.3 trillion bill to rescue companies and keep the financial system from collapsing.
Oil prices were steady around $51 a barrel, after dropping nearly 7 percent on Tuesday on fears a global recession will weigh on demand.
The U.S. dollar inched up against the euro as market players remained skeptical that the latest U.S. measures to boost consumer lending would ease concerns about the financial crisis. Worries over the global economic downturn and credit jitters have kept investors wary of taking risks, limiting selling of the dollar and yen , traders said.
All eyes were on the Stock Exchange of Thailand. Thai stocks dropped 2 percent due to mounting political tension in the country and reports of several bombs overnight, all of which is likely to trigger further selling from foreign investors, analysts said. Anti-government protesters have laid siege to Bangkok's international airport, demanding that Thai Prime Minister Somchai Wongsawat resign, challenging him directly as he returns from a foreign trip.
Japan's Nikkei 225 Average dropped 1.3 percent as the yen fell back to help exporters such as Canon cut losses, while optimism over a U.S. Federal Reserve bailout fought with fears over global economic gloom. Panasonic shed well over 3 percent after Goldman Sachs said it had broken off talks on the possible sale of Goldman's shares in Sanyo Electric.
South Korea's KOSPI gained 5 percent led by banks on hopes of better liquidity conditions after a massive U.S. financial package on Tuesday, while steelmakers rose after BHP dropped its bid for rival Rio Tinto. POSCO shares added 3.7 percent.
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Australian shares fell 2.3 percent as Rio Tinto hit a four-year closing low after BHP Billiton dropped its takeover offer, while the market's recent rise encouraged some investors to take profits in banks. BHP rose nearly 4 percent on relief that it would not have to take on massive debt to buy Rio, but other commodity stocks, such as Woodside Petroleum, fell due to lower oil prices. Rio shares plunged 34 percent.
Hong Kong shares rose 3.8 percent, with HSBC and exporters rallying on the U.S. Federal Reserve's latest rescue plan, while metal producers surged after BHP Billiton scuppered its bid for rival Rio Tinto. Shares in U.S.-focused consumer goods exporter Li & Fung jumped 7.7 percent while HSBC climbed 5.9 percent. Standard Chartered, which was hammered the previous session on its planned $2.69 billion rights issue, bounced back over 10 percent.
Singapore's Straits Times Index was up 3.5 percent with a mixed performance in blue chips.
China's Shanghai Composite Index was about half a percent higher, led by steel shares after on BHP's scrapped Rio bid. The scuppered deal that could support iron ore prices. Baoshan Iron and Steel, the biggest listed steel firm, climbed. But the leading coal producer, Shenhua Energy, fell.