Asia Sinks as Recession Fears Overwhelm

Asian stocks fell sharply with Japan losing 6.5 percent and South Korea down 7.5 percent Thursday as more evidence that the U.S. economy is shrinking made investors brace for a potentially deep and lasting global recession.

Investment bank Goldman Sachs, a firm that had early in the financial crisis profited on bets against the U.S. mortgage market, reportedly cut 3,200 employees this week, and the Bank of England and the European Central Bank were expected to cut interest ratesaggressively to shore up their economies.

Major U.S. stock indexes posted losses Wednesday of more than 5 percent, as the ebullience surrounding Barack Obama's landslide U.S. presidential election victory faded and the cold reality set in that a new administration will unlikely be able to act fast enough to avert further economic damage.

The euro and sterling fell against the dollar, ahead of expected rate cuts in Britain and Europe, while the yen firmed against higher-yielding currencies as fear-based trades ruled. Oil prices fell below $65 a barrel in the Asian session on signs of slowing demand, while government debt rose on safe-haven buying.

The Nikkei 225 Average closed down 6.5 percent, for its biggest one-day loss in nearly two weeks as exporters slid on a stronger yen, while fears about the global economy grew after dismal U.S. data. Automakers tumbled, with Toyota Motor down 10.4 percent on fears about its earnings, due out after the close, while Isuzu Motors plunged 20.7 percent after it cut its outlook and a brokerage downgrade. The broader Topix was down 6 percent.

South Korea's KOSPI ended 7.56 percent lower with banks and exporters leading the falls amid mounting worries about the economy, as investors fret ahead of Friday's U.S. jobs data. The index is still up some 22 percent up from the late October low of 892.16 points, but down 42 percent on the year.

Australian shares fell 4.3 percent, as miners such as BHP Billiton fell on concerns about of a prolonged slowdown in the global economy, while banks fell due to their exposure to collapsed firms. But Foster's Group, Australia's top brewer, rose 4.1 percent after Molson Coors Brewing acquired an interest in the group. News Corp tumbled over 21 percent after it cut its full-year forecast and posted a worse-than-expected 30 percent drop in quarterly profit.

Hong Kong shares slumped 7 percent, as Cathay Pacific Airways tumbled after it warned of disappointing results this year and commodity-linked stocks fell on lower resources prices. Dah Sing Banking slid 9.4 percent after it warned that its second-half earnings would be hit by the global financial turmoil. Parent Dah Sing Financial Holdings plummeted 18 percent.

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Singapore's Straits Times Index closed more than 2 percent down, dragged lower by financials. Top lender DBS Group and Oversea-Chinese Banking Corp were both down sharply. Keppel Land slumped nearly 10 percent after JPMorgan cut its target price on expected writedowns due to a downturn in Singapore's property market, and City Developments fell 6 percent.

China's Shanghai Composite Index dropped 2.4 percent, tracking a fall in overseas markets as worries about global recession moved to the fore, with large caps hit by profit-taking from the previous day's gains. Bank and property shares posted big losses after they were among the biggest gainers in the previous session. China Construction Bank fell 6 percent, while mainland developer China Overseas Land Investment tumbled 7 percent. Offshore oil producer CNOOC dropped 9 percent after crude oil prices fell 7 percent overnight and following a Credit Suisse downgrade on the stock.