japan stock market 224 88 ap.
(photo credit: AP)
Asian stock markets plunged Monday as investors took scant comfort from Washington's passage of a US$700 billion bank bailout and focused instead on deepening financial turmoil in Europe that threatens to slow global growth.
Traders were spooked by Germany's announcement Sunday of a new bailout package totaling 50 billion euros (US$69 billion) for Hypo Real Estate, the country's second-biggest commercial property lender, part of a scramble by European governments to save failing banks.
A dismal report on the US job market released Friday added to the gloom, fanning worries about US consumer demand for Asian exports.
Despite this, Bill Gates believes the financial crisis will not lead to the end of capitalism or a depression, according to a CNN television interview broadcast Sunday.
"It's a very interesting crisis," said the founder of Microsoft, adding that the effect of the collapse of the subprime market "requires "some type of correctionâ€¦ but fundamentally ... companies' willingness to invest, right now we haven't seen a huge disruption in that."
Responding to concerns about the US$700 billion bailout plan which US President George W. Bush signed last week, Gates surmised that "it doesn't look like fixing these problems is going to derail the economy in some dramatic way."
Gates stressed that "the amount of innovation taking place, the amount of investment is actually greater today than ever," and said he believed this would be the answer to the current crisis.
"Because you not only have more American companies with more scientists and engineers and innovators, but now you have ... people from all over, including lots of people in India and China, now contributing to new drug design, new software design, new energy generation design."
On Monday, Japan's benchmark Nikkei 225 average sank 4.2 percent to 10,475, while Hong Kong's Hang Seng index slid 3.4 percent to 17,089. Markets in mainland China, Australia, South Korea, India, Singapore and Thailand also fell sharply. Indonesia's key index plunged more than 5 percent.
"This credit crunch looks like it's not going away any time soon," said Alex Tang, head of research at brokerage Core Pacific-Yamaichi in Hong Kong. "Apart from a credit crunch in Europe, investors are quite concerned about the worsening outlook on the US economy."
"We haven't seen any positive developments in Europe or the US, apart from the rescue plan," Tang said. "But even with the rescue plan, investors are focused on the slowing economy."
Investors were processing a series of developments out of Europe over the weekend. Belgian Prime Minister Yves Leterme said Sunday that France's BNP Paribas SA had committed to taking a 75-percent stake in troubled European bank Fortis NV.
British treasury chief Alistair Darling also said he was ready to take "pretty big steps that we wouldn't take in ordinary times" to help the country weather the credit crunch.
Figures released Friday showed that 159,000 jobs in the US were lost last month, the fastest pace in more than five years, showing that the world's largest economy is clearly suffering.
Such concerns overshadowed any investor optimism over the US House of Representatives' approval Friday of a massive bailout plan that will allow the US government to buy distressed mortgages and securities backed by mortgages from banks and other financial institutions.
Investors questioned how long it would take for the package to unfreeze credit markets, restore bank lending and generally shore up the US economy.
"The market had already figured in the package's passage," said Yukio Takahashi at Shinko Securities Co. in Tokyo. "There are strong doubts about its implementation."
Japanese financial companies and industries dependent on exports, such as steel, were especially hard hit Monday. Nippon Steel Corp. stock tumbled 9.8 percent, while Mizuho Financial Group was down 8.3 percent in morning trading.
Trading in mainland China resumed after a weeklong holiday break with the benchmark Shanghai Composite Index sinking 3.5 percent to 2,213.08 by midday.
Banks and other financial shares saw heavy declines. Shanghai Pudong Development Bank fell 7 percent and Bank of China slipped 3.6.
Shares of Ping An Insurance Co. rose even after it said Monday it will record a US$2.3 billion loss on its stake in European bank Fortis in the biggest blow yet to a Chinese institution from the global credit crisis. Ping An's shares were up 1.6 percent.
US stock index futures were more than 1 percent lower, suggesting Wall Street would open lower Monday. The Dow Jones industrial average fell 157.47, or 1.5 percent, to 10,325.38 on Friday.
In currencies, the euro slid to US$1.3618 from US$1.3774 late Friday. But the dollar was weaker against the yen, falling to 103.11 from 105.30 yen late Friday.
Oil prices tumbled on speculation that slower global growth will cut crude demand. Light, sweet crude for November delivery was down US$1.85 to US$92.03 a barrel in Asian electronic trading on the New York Mercantile Exchange.