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Men in Tokyo look at an electronic board displaying share price movements on Oct. 6, the day that Japan's Nikkei share average sank to a four-and-a-half-year closing low

Men in Tokyo look at an electronic board displaying share price movements on Oct. 6, the day that Japan's Nikkei share average sank to a four-and-a-half-year closing low

For the most part, Asian banks have remained unscathed and economies relatively robust compared with other parts of the world. But tumbling Asian stock markets, marked on Monday by near-panic selling, is signaling just how little confidence there is among bankers and investors that the $700 billion bailout of U.S. banks will end the financial crisis.

Instead, worries are growing that a severe economic downturn in the U.S. and Europe could hurt export-driven Asian economies more than originally thought. Turmoil in Europe as governments scramble to cobble together their own bailout packages has convinced Asia that the contagion will spread far from Wall Street. “We felt pretty good that our economies are stronger,” says Song Seng Wun, an economist at CIMB-GK Research in Singapore. “Problems seemed to be other people’s problems.” But recent events “have made us realize that we aren’t entirely safe. It looks like the problem might be closer to home.”

That’s because credit markets, which affect the ability of businesses and governments to borrow to fund day-to-day operations, continue to tighten in Asia as banks become more nervous about lending. In Hong Kong, the one-month interbank lending rate has doubled in the past month to 4%. Central banks are trying to pump liquidity into financial markets to avert a credit crunch. India on Monday cut the amount of cash that banks must deposit with the central bank in an attempt to loosen credit. “Credit markets are quite global,” says Kirby Daley, senior strategist at financial services firm Newedge Group in Hong Kong. “It is inescapable, if the credit crisis continues to worsen, that Asia must be affected.”

Source: TIME

Dow slids below 10,000, watched by trader Arthur Cashin wearing a 'Dow 10,000' hat that was given out when the index first hit 10,000 on March 29, 1999

Dow slids below 10,000, watched by trader Arthur Cashin wearing a 'Dow 10,000' hat that was given out when the index first hit 10,000 on March 29, 1999

US stock markets slumped sharply with the Dow Jones falling through the psychologically important 10,000 mark for the first time since October 2004 amid fears that the fallout from the credit crisis will push the country deep into recession.

The Dow Jones fell 569.8 to 9755.5, with the S&P 500 off 64.2 at 1035.0 despite moves by the Federal Reserve to instill confidence in the financial system through capital injections.

Nearly a quarter of the stocks on the New York Stock Exchange hit new lows within an hour of the opening of the markets, with every stock in the Dow Jones index down on the day.

The S&P 500 was flat to its trading level 10 years’ ago, leading US commentators to speak of a “lost decade” in equity markets.

The stock market slumps followed similar moves in Europe where the FTSE 100 was on course for its biggest one-day fall in more than 20 years.

The index of leading shares was down almost 9pc at one stage – the biggest decline since the aftermath of Black Monday in October 1987.

A host of the UK’s biggest banks were rocked by turmoil across the European banking sector, with Royal Bank of Scotland falling 22pc at one stage. Mining stocks were also hit, dragged down by fears of falling demand in the face of a growing global slowdown.

Germany’s Dax was off 7.4pc while the Cac-40 in France fell 8.2pc and Italy’s benchmark S&P/Mib fell 9.17pc – its lowest level since the index was established in September 2004.

Traders in the US said the only way to halt the decline, even temporarily, was for central banks around the globe to push through co-ordinated interest rate cuts.

“There is no support to halt share declines. No one is buying,” said one trader at a big US bank. “We were told to reduce our risk and to stay out of the markets. There is too much irrational behaviour out there.”

The stock market declines will heighten fears over the US government’s power to prop up markets despite its success in pushing through a $700bn (£403bn) bailout of the banking system on Friday.

The Federal Reserve acted to shore up confidence in the banking sector today and free up the credit markets by doubling the amount of money it makes available under its Term Auction Facility to $900bn.

Banks will be able to draw down funds from the facility and maintain liquidity in the face of an interbank lending market that has all but ceased to function.

In Asia, Japan’s Nikkei index lost 4.2pc, South Korea’s Kospi slipped 4.3pc and Hong Kong’s Hang Seng fell 5pc. China’s CSI 300 Index fell 5.1pc, as trading resumed after a one-week holiday.

Source: Telegraph

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