Asian markets further weakened Wednesday while the yen rose, with risk-averse investors fretting about the deepening damage to corporate profits and consumer spending despite a late rally on Wall Street.
Market players were also spooked after U.S. automakers gave a dire warning to lawmakers about their outlook while pleading for $25 billion of bailout funds from Congress.
Oil was steady, trading below $55, near a 22-month low, on mounting worries about a deep global economic recession, highlighted by data overnight showing confidence at U.S. home builders plunging to a record low.
The South Korean won hit a three-week low while weakness in emerging market currencies knocked the Philippine peso down and led to suspected purchases by the country's central bank to prop it up, while the Indonesian rupiah slid to a seven-year low. The yen climbed as falling stocks spurred selling of higher-yielding currencies as investors shifted funds into the relative safety of the Japanese currency as well as the dollar.
Japan's Nikkei 225 Average edged down 0.7 percent to a one-week closing low, with high-tech exporters such as Tokyo Electron hit by a strong yen and fears about a U.S. carmaker bailout weighing. Increasing gloom about the global economy hit trading houses such as Mitsubishi Corp and other economy-sensitive shares on worries about falling demand, though defensive shares held their ground and prevented falls from worsening.
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Seoul shares ended 1.9 percent lower after losing as much as 4 percent as refiners and banks slid on worsening profit outlooks, but gains seen in battered techs and defensive issues lent some support. LG Electronics ended 1.53 percent higher after seven consecutive losing sessions that pushed the stock down 24 percent.
Australian shares fell 0.7 percent, its fourth straight lower close, as the resumption of short selling in non-financial stocks triggered falls in some companies which had outperformed in the recent sharp downturn.
Hong Kong shares closed 0.8 percent lower, with gains in oil refiners amid lower crude prices and a rebound in global lender HSBC Holdings stemming a second day of losses for Chinese banks. Telecom equipment makers and service providers outperformed after China Mobile, the world's largest wireless carrier, confirmed it had awarded contracts worth $4 billion towards building the second phase of the country's third generation (3G) network.
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Singapore's Straits Times Index was down 3.1 percent. Shares of Singapore-listed Neptune Orient Lines fell 3 percent after the firm announced job cuts and forecast a dismal profit outlook for next year. NOL, the world's seventh-largest container line, said it would axe 1,000 jobs as part of moves to save the firm $200 million in costs in 2009. The largest impact of the job cuts would be in North America, the firm said, while 50 jobs would be cut in its Singapore office.
China's Shanghai Composite Index closed 1.6 percent lower after early gains led by oil refiners on hopes that the introduction of a fuel tax in China would lead to higher gasoline prices and improve their refining margins. Sinopec, the biggest refiner, surged in early trade and PetroChina also gained after the China Daily quoted the head of the National Development and Reform Commission's Energy Research Institute as saying the long-awaited fuel tax would be imposed "very soon".