Huge market losses in Europe, Asia

INVESTOR panic about a looming global recession sparked massive stock market losses in Asia and Europe today, as concern grew that the financial crisis was taking a heavy toll. Tokyo lost 9.60 per cent, ending below the key 8,000-point level for the first time in more than five years as the yen soared and after a profit warning from tech giant Sony.

And the Hong Kong market closed with a loss of 8.3 per cent.

"Volatility and uncertainty seem to be the watch words at the moment," said CMC Markets trader Matt Buckland in London.

"Asian markets have again been under pressure overnight whilst there's also a degree of concern surrounding the corporate forecasts that came out from across the Atlantic last night."

European equities spiralled lower, with London diving 5.51 per cent ahead of vital data which was expected to reveal that Britain's economy shrank in the third quarter for the first time in 16 years.

"Rumours are flying that the (growth figure) will come out negative, putting more pressure on the UK Government to help out the e conomy," added BetOnMarkets analyst David Evans.

Elsewhere, Frankfurt tumbled as much as 6.71 per cent and Paris was down about five per cent in early morning trade, before European markets trimmed their losses somewhat.

The yen soared to a 13-year high against the dollar and to a six-year peak against the euro as investors took shelter from the latest storm lashing global financial markets.

The European single currency meanwhile tumbled underneath 1.27 dollars, hitting a two-year low on expectations of eurozone interest rate cuts and slowing economic growth, dealers said.

"The best word to describe what's going on right now is panic," said Credit Suisse strategist Satoru Ogasawara.

"When you don't know what will come next, you tend to flee to the safest place."

South Korean shares dived 10.6 per cent - a day after a 7.4 per cent plunge - after the domestic economy grew at its slowest pace for four years and Samsung Electronics reported a sharp drop in quarterly profit.

"The market seems to be still in panic," Lee Kyung-Soo, from Taurus Investment & Securities, told Dow Jones Newswires in Seoul.

Sydney ended with a loss of 2.6 per cent, while Hong Kong was down nearly seven per cent in the afternoon session.

The sell-off came as Asian leaders meeting in Beijing agreed to set up an $US80 billion ($A118.8 billion) fund to fight the global economic crisis.

The deal between South Korea, China, Japan and the 10 members of the Association of Southeast Asian Nations is the first major coordinated regional action since the full force of the financial turmoil erupted last month.

In Australia, three big investment firms said they had frozen at least $US3.66 billion ($A5.44 billion) worth of investors' funds to stem an exodus sparked by a government deposit guarantee.

The rout supported the yen, particularly against higher-yielding currencies such as the euro, the dollar and the British pound.

The dollar fell to 95.32 yen, its weakest since August 1995. The euro slipped below 123 yen for the first time in almost six years as investors unwound risky bets funded with cheap Japanese credit.

The stronger Japanese currency is bad news for exporters such as Sony, which warned it now expects its annual profits to drop by more than half.

Governments around the world have pumped cash into the banking system in recent weeks to try to contain what former Federal Reserve chairman Alan Greenspan described yesterday as a "once-in-a-century credit tsunami".

While there have been some tentative signs of an easing of the credit crunch, concerns are growing about the worsening outlook for economic growth and corporate earnings.

"The theme of weaker global growth has replaced the issue of troubled banks for now and continues to weigh on investor psyches," said analysts at UBS.

Wall Street's share indexes closed mostly higher yesterday in a volatile session.

"But it was only a marginal gain after massive selling. The direction of global markets has not changed," said Daisuke Uno, chief market strategist of Sumitomo Mitsui Banking Corp in Tokyo.





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