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Asian markets plunge on U.S. recession news

Business Materials 2 December 2008 10:50 (UTC +04:00)

Asian and Pacific stocks nosedived Tuesday, with Hong Kong's Hang Seng index off 5 percent after grim U.S. economic news battered Wall Street, reported CNN.

Japan's benchmark Nikkei index dropped nearly 4.7 percent after an initial fall of more than 5.6 percent in early trading.

Australia's All Ordinaries was down 3.5 percent in late afternoon, and Seoul's KOSPI index was down 2.4 percent after rallying from a 3.5 percent deficit.

The Shanghai composite index bucked the trend, gaining about two-tenths of a percent by early afternoon after dropping about three-quarters of a percentage point at the opening.

The slide followed a sharp dip in the U.S. markets on Monday, when Wall Street was hammered by investor bailouts and economic analysts concluded the United States is mired in a recession that is likely to continue for some time.

The Dow Jones Industrial Average lost 680 points, its fourth-biggest single-session decline on a point basis ever. The decline was 7.7 percent in percentage terms -- the 12th worst percentage one-day decline ever. It ended at 8,149.

The Standard & Poor's 500 index Monday fell 8.9 percent, and the Nasdaq composite gave up 9 percent.

Year-to-date, the Dow is down 38.6 percent and has lost 42.5 percent from its record close of 14,164.53 on October 9, 2007.

Treasury prices rallied, lowering the corresponding yields. Oil and gold prices plunged, and the dollar tumbled versus the yen and gained against the euro.

Stocks slid throughout the morning as investors sorted through Black Friday sales reports and weak readings on manufacturing in the United States and abroad.

But the selling accelerated in the afternoon after the National Bureau of Economic Research confirmed what many have long believed -- that the nation is in a recession. According to the NBER, the official body that calls economic cycles, the United States has been in a recession since December 2007.

"The economy stinks, the manufacturing report didn't come out well, and the announcement from the NBER didn't help," said Ram Kolluri, president at Global Investment Management.

"There's a real nervousness about the economy," he added.

Monday afternoon, Federal Reserve Chairman Ben Bernanke said the economic weakness will continue for some time, despite the impact of the government's efforts to get money flowing again. Treasury Secretary Henry Paulson said the downturn is significant.

Global economic news was pretty grim as well, with manufacturing surveys in Britain and the euro zone showing a steep slowdown. A reading on China's manufacturing survey was equally worrisome.

The yield on the 3-month U.S. Treasury bill improved to 0.03 percent from 0.02 percent Friday, but still not far from the 68-year lows of zero hit last month. The 3-month is seen as the safest place to put money in the short term. A low yield means wary investors would rather preserve cash despite earning little or no interest on it than risk the stock market.

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