Asian markets fell Tuesday after Citigroup cut 52,000 jobs in a dramatic move to save itself and downbeat policymaker comments reflected worsening economic conditions that will unlikely improve until well into 2009.
Despite relatively stable conditions in short-term credit markets, banks were struggling to contain climbing losses on bad loans, with Citi, the second-largest U.S. bank, reducing 15 percent of its workforce and HSBC laying off an additional 500 staff in Asia after announcing 1,100 job cuts in September.
The move by the No. 2 U.S. bank sent a shiver through Wall Street, as did data showing Japan had unexpectedly fallen into recession.
The U.S. dollar fell against the yen , as poor manufacturing data exacerbated the gloom surrounding the U.S. economy. Oil dropped to its lowest in 22 months, as Japan's recession deepened fears of a global slowdown.
Japan's Nikkei 225 Average closed down 2.3 percent, dragged down by worries about a weakening global economy that battered exporters such as Sony, though bargain-hunting prevented further slides. Softbank fell 15 percent to become the biggest drag on the Nikkei after a newspaper said Japan's No.3 wireless carrier faces an increasing risk of a $776 million special loss from a financial derivative.
South Korea's KOSPI finished almost 4 percent lower as tech exporters like Hynix Semiconductor and LG Electronics dipped on worries about worsening export conditions after the news of massive job cuts by a major U.S. bank. But some local banks outperformed the market on hopes of capital increases. Hynix lost 11.17 percent, and LG Electronics fell 5.26 percent, but Hana Financial climbed 5.45 percent and Woori Finance Holdings.
Australian stocks fell 3.6 percent, erasing early gains, as global recession fears overtook relief that top investment bank Macquarie Group was not going to raise capital. Macquarie bucked the negative trend and soared as much as 26 percent, and closed up 17 percent. Miners and companies considered most likely to tap investors for cash were the biggest victims in the sell down.
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Hong Kong shares dropped further, down 4,5 percent, tracking the downdraft in regional markets with issues beaten down across the board by worries over a protracted global recession. Shares in Hong Kong Exchanges & Clearing, Asia's largest listed bourse operator, dropped 7.5 percent, adding to Monday's steep decline after Morgan Stanley slashed its target price on the stock. HSBC Holdings was down 3.6 percent.
Singapore's Straits Times Index slide 3.3 percent with blue chips leading the declines. Shares of commodity firm Noble Group fell 9.8 percent after Merrill Lynch downgraded the shares to an "underperform" rating from "buy", saying the commodity slowdown will stretch into 2009.
China's Shanghai Composite Index fell 6.3 percent, pulling back from technical resistance as the property sector sagged. Property shares were hurt by concern that China's economic slowdown would continue undermining real estate prices.