Deepening economic gloom and fears about the health of the global finance sector pushed Asian shares to their lowest level this month Wednesday, prompting investors to move to low-risk assets such as regional bonds.
The euro briefly fell to a new 2-½ month low against the dollaras the currency continued to reel from rating agencies' warnings that a deep recession in Eastern Europe will inflict more damage on struggling Western European banks.
U.S. economic data on Tuesday added to the grim mood, showing a severe slump in factory activity appeared to be getting even worse this month, while sentiment among U.S. home builders shows few signs of recovering after the bursting of the housing bubble.
U.S. President Barack Obama signed a $787 billion economic stimulus bill into lawon Tuesday, and was expected to lay out a strategy later in the day to stem home foreclosures and address the housing crisis -- one of the chief causes of the global financial crisis and sharp economic slowdown.
Other sectors such as auto makers are also in big trouble as consumer demand slumps in the face of recession. General Motors and Chrysler LLC requested nearly $22 billionin combined additional U.S. government aid on Tuesday.
The euro kept tumbling following Moody's report saying banks in Eastern Europe with large loan books faced downgrades and their parent banks' ratings could also weaken. Crude oil prices trade below $35 a barrel on fears of weak demand.
Japan's Nikkei 225 Average shed 1.5 percent to hit its lowest close in nearly 4 months as financial shares sank amid worries about European banks and credit concerns hit property firms.
Seoul shares closed down 1.2 percent led by financials such as KB Financial on deepening worries about European banks, but technology issues including Hynix Semiconductor outperformed helped by the weaker won currency.
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Australian shares closed down 1.5 percent, led by top miners and energy stocks after copper and oil prices fell on more signs of a deepening global recession. BHP Billiton, the world's biggest global miner fell 4.4 percent after the Reuters-Jefferies CRB index, a global commodities benchmark, slumped to a 6-½ year low. But rival Rio Tinto, finished 1 percent higher.
Hong Kong shares rose 0.5 percent despite fears the financial market and the economy may go down another leg. Global bank shares including HSBC slid on worries over risks to European banks from the credit turmoil. Commodity counters came under further pressure after oil prices dropped 7 percent on Tuesday amid demand worries and stayed below $35 per barrel. HSBC fell 1.4 percent, within striking distance of sliding below a decade-low for the stock.
Singapore's Straits Times Index closed 0.8 percent higher. Shares of Singapore Technologies Engineering, the world's largest aircraft repair firm, rose 8.7 percent as analysts saw upside in its share price and good fundamentals, despite weaker profits. Overall volume was thin.
China's Shanghai Composite Index fell sharply for a second straight day, down 4.7 percent as shrinking turnover suggested inflows of fresh money into the market were drying up.