Asian markets dived and U.S. stock futures slumped Monday, while safe-haven U.S. Treasuries gained after the Obama administration's autos task force rejected turnaround plans for troubled automakers GM and Chrysler.
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Monday's announcement by the White House autos panelmarked a stunning reversal for management at the two U.S. companies, and raises the prospect of bankruptcies that could further debilitate the already ailing U.S. economy.
U.S. stock futures were also hit, with the S&P 500 down 1.7 percent. The yen rose , benefiting from the sudden spike in risk aversion, which threatens to cut short a rally in stocks worldwide driven by signs the global economy may be near a bottom. Crude oil prices fell below $52 a barrel on weaker stock markets and softer economic data.
Data on Monday showed Japan's industrial output fell for a fifth consecutive month in Februarybut also flagged signs of a tentative recovery, while South Korea posted its biggest current account surplus in 11 yearsdue to the weaker won currency.
Japan's Nikkei 225 Average 4.5 percent, its biggest one-day fall in over 2 months, with Japanese automakers leading the declines. Toyota dropped 3.6 percent, Nissan ended 7.6 percent lower while Honda Motor shed 6.7 percent. Mitsubishi UFJ Financial Group and other banks, hit earlier in the day by profit-taking, extended losses on worries about the impact of a possible GM bankruptcy.
South Korea's KOSPI finished down more than 3 percent to below 1,200 points, with bank shares leading losses on bad debt concerns and deepening woes in the U.S. auto industry hitting local makers. The won's sharp fall against the U.S. dollar also triggered profit taking from foreign investors, analysts said. KB Financial Group fell 6.6 percent and Hyundai Motor dropped 3.8 percent. Hynix Semiconductor extended its rally to gain 3.3 percent.
Australian stocks ended down 1.9 percent as top financials such as National Australia Bank fell on renewed worries over the global economy and most resources stocks fell on weaker commodities prices. Shares in investment bank Macquarie Group fell 1.8 percent. The company announced it had taken steps to start legal action over shares in a toll road project.
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Hong Kong shares shed 4.7 percent, retreating from last week's 10 percent rally with blue chips such as China Construction Bank and Chalco pulling back on missed earnings forecasts. China's No. 3 lender by market value, Construction Bank slid 10 percent after missing its fourth-quarter earnings forecasts on increased impairments on bad loans. HSBC slashed it rating on the stock to underweight from neutral with a target price of HK$4.20.
Singapore's Straits Times Index tumbled 4.5 percent. Oil rig builders Keppel Corp and Sembcorp Marine dropped sharply, Keppel down 5.9 percent, Sembcorp down 8.4 percent, after U.S. crude oil price fell nearly $2 on Friday.
China's Shanghai Composite index fared the best in the region, down 0.7 percent, with non-ferrous and steel shares dragged lower by poor results at the sectors' leading firms while financial shares were firm. Aluminum Corp of China (Chalco), the world's largest aluminium firm by market value, sank after posting a bigger-than-expected net lossin the fourth quarter, its first deficit in a decade, and warning of a first-quarter loss.