Asian markets fell Tuesday as concerns grew about the global financial system, while emerging currencies such as the South Korean won extended their recent sell-off.
Strong gains in Asian shares on Monday were completely erased as optimism over reports that the U.S. government could take a bigger stake in Citigroup gave way to fresh questions about whether Washington is doing enough to stabilize the ailing banking and credit sectors.
Traditional investor havens in times of turmoil such as the dollar and gold dipped, though analysts predicted these asset classes could soon resume their recent rallies as the uncertainty in global markets continues.
Problems in the global financial system continue to multiply as massive credit losses and recession weigh on lenders. American International Group, which was rescued twice last year by the U.S. government, is in talks with officials for more aid, while in France the government is expected to provide more funding to two mutually owned banks.
Emerging Asian currencies were among the hardest hit by the continued market turbulence. South Korea's won was was hardest hit. Korean markets have been battered by a collapse in Asian exports amid the global demand slump, and by the economy's reliance on short-term overseas debt that needs to be refinanced in the toughest market conditions in years.
Among major currencies, the dollar slipped against the yen as some investors booked profits on the previous day's rally, when the U.S. currency struck a three-month high of 94.95 yen on trading platform EBS. The euro edged lower against the yen , staying under pressure after European Central Bank President Jean-Claude Trichet said on Monday the euro-zone financial system is under severe strain. The weak global demand outlook continues to undermine oil prices, sending oil futures down to $38 a barrel, extending declines from the previous session.
The Nikkei 225 Average slipped 1.5 percent to a four-month closing low as Nomura Holdings tumbled, with Wall Street's slide to a 12-year low on fears about the stability of the financial system adding to the pressure on the market. Investors mostly shrugged off a comment from Japan's finance minister that the government was studying steps to support the stock market. The Nikkei briefly fell to 7,155.16 -- below the Oct. 27 close of 7,162.90, which was the lowest finish since October 1982.
South Korea's KOSPI finished more than 3 percent lower, hit by a regional sell-off triggered by mounting concerns over the global financial system's health that pounded financial stocks and blue chips across the board. Shinhan Financial Group fell 6.1 percent and Mirae Asset
Securities lost 6.53 percent. Electronics giant Samsung Electronics declined 3.6 percent and steel maker POSCO dropped 6.78 percent.
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Australian shares closed down 0.6 percent to a five-year closing low as banking stocks dropped on fresh worries about the financial system, while travel firm Flight Centre tumbled on a weak profit report. Still, Australian shares fared better relative to their regional peers, helped by gains in oil and gas producer Woodside Petroleum and gold miners on expectations bullion prices would keep rising as a refuge from volatile markets worldwide.
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Hong Kong shares plumbed a one-month low before settling 2.9 percent lower after a fresh wave of fears about the financial system and tanking commodity prices battered stocks across the board. Only one stock advanced for every 10 that were in the red on Tuesday morning. Bucking the downtrend, Hongkong Electric rose 3.2 percent on safe-haven buying.
Singapore's Straits Times Index was down 1 percent, led by losses in financials, commodities and property firms. Lender OCBC was down 1.2 percent, CapitaLand slid 0.9 percent and commodity trader Noble fell 4.6 percent.
China's Shanghai Composite Index fell 4.6 percent, led by financials, after another tumble on Wall Street increased worries about the health of the global economy and markets.