(Recasts, adds quotes, updates prices)
By Louise Heavens
SINGAPORE, Jan 22 (Reuters) - Major Asian stock markets
fell as much as 8 percent as panicky investors feared a U.S.
recession could derail global economic growth, and a sharp drop
in U.S. stock index futures pointed to heavy selling in New
York later on Tuesday.
Industrial metals such as zinc and copper <MCU3> plunged and
oil fell well below recent record highs as the prospect of
slowdown posed a threat to demand.
Investors, fearful of a protracted bear market, sought the
relative safety of government bonds.
European shares are set to extend Monday's savage sell-off,
which saw them suffer their biggest one-day slide since the
Sept. 11, 2001 attacks in the United States.
Financial bookmakers in London see Britain's FTSE 100
<>, Germany's Dax <> and France's CAC-40 <>
notching up opening losses of more than 1 percent.
Share markets from Tokyo to Sydney slumped between 4-8
percent, with India's benchmark Sensex <> crashing more
than 11 percent at one point, triggering a trading halt.
"It's like a funeral in here," said Ken Masuda, senior
equities dealer at Shinko Securities in Tokyo. "No one knows
what's going to happen tonight in New York. It's like we've
gone blind, you don't know what's coming.
"Until we see New York, all we can do is sell," he said.
U.S. stock index futures <SPc1> <DJc1> fell around 4.5
percent, signalling a sharp sell-off on Wall Street later.
All eyes are on earnings from Bank of America <BAC.N>
later, anxious to see if there are further writedowns related
to exposure to risky mortgages.
The sell-off, which has rocked markets since late December,
gathered pace sharply on Friday where U.S. equity markets
suffered their worst weekly performance since mid-2002, showing
a clear lack of confidence in Washington's proposed fiscal
stimulus worth up to $150 billion. []. Wall Street
reopens later after a holiday on Monday.
Comments from IMF Managing Director Dominique Strauss-Kahn
that all developed countries were suffering from the U.S.
slowdown entrenched fears that global growth was hitting a
wall. []
Billionaire investor George Soros said the world was facing
the worst financial crisis since World War Two and the United
States was threatened with recession. []
STAY CALM
The yen hit a 2-1/2-year high against the dollar <JPY=> and
was trading at 106.05 yen by 0628 GMT as investors reduced
their exposure to risky, higher-yielding assets. The strong yen
hit Japanese exporters such as Toyota Motor Corp <7203.T>, Sony
Corp <6758.T> and Canon Inc <75751.T>.
MSCI's All Country World Index <.MIWD00000PUS> fell 1.5
percent to its lowest since October 2006. The MSCI All Country
index has dropped about 19 percent since its November 2007
peak.
MSCI's Emerging Market index <.MSCIEF>, which on Monday had
its worst daily fall since August, shed almost 5 percent.
Japanese treasuries <TYv1> surged as alarmed investors
sought the relative safety of government debt, with March
10-year futures <2JGBv1> hitting the highest since September
2005.
The widely-followed iTRAXX Asia ex-Japan high-yield index
<ITAHY12Z8A=ITX>, a key measure of risk aversion, widened, and
some investors called on central banks to restore confidence.
"This has just begun. It's the popping of a credit bubble.
We're in chapter 2 of a five chapter story," said a Treasuries
trader at a U.S. investment bank in Tokyo.
Indian Finance Minister Palaniappan Chidambaram urged
investors to stay calm, insisting the fundamentals of the
economy remain strong.
The Bank of Japan kept interest rates at 0.5 percent as
expected and is set to warn of slower growth in an economic
review due later. []
BIGGEST DROP SINCE 9/11
Japan's Nikkei <> ended down 5.7 percent -- a 28 month
low and its biggest one-day loss since the Sept. 11 attacks.
The index lost 9 percent so far this week as fears deepened
that the U.S. subprime mortgage crisis would drag global
financial markets lower.
South Korea's technology stocks, heavily dependent on the
U.S. export market, were mauled, pushing the main stock index
<> down to its lowest close since May. The slump wiped
around 37 trillion won ($39 billion) off the value of the main
board. South Korea's national pension fund said it was a net
buyer of blue-chip stocks.
Hong Kong blue chips <> spiralled lower, sliding 8.6
percent, with U.S. recession fears dragging bellwether bank
HSBC Holdings <0005.HK> to lows not seen since October 2003.
Hong Kong-listed shares in mainland companies <.HSCE> sank
12 percent. The Hang Seng Index <> is down about 30 percent
since a recent peak in late October and off 19 percent this
year.
Shanghai's stock index <> fell 8 percent.
The president of China's sixth-largest bank, China
Merchants Bank Co <600036.SS><3698.HK>, told Reuters on Monday
that earnings at Chinese banks will probably be hit this year
by the snowballing U.S. subprime mortgage crisis and Beijing's
moves to cool the economy. []
"News like this suggests that damage may be spreading in
developing markets including China, and this is worsening the
overall sentiment in financial markets," said Toshiyuki Suzuki,
a New York-based strategist at Mitsubishi UFJ Bank. "It appears
that these markets, too, will not be able to escape the impact
of the wave of worsening international economies."
Australia's S&P/ASX 200 share index fell 7 percent, its
biggest one-day percentage fall since becoming the benchmark.
Mining stocks, sensitive to any economic slowdown, led the
decline. BHP Billiton <BHP.AX> fell almost 7 percent and Rio
Tinto <RIO.AX> tumbled 11.6 percent.
Shanghai copper and zinc futures fell by their 4 percent
daily limits.
Oil deepened losses as global stock markets tanked.
London's Brent crude <LCOc1> fell more than half a dollar to
$86.85 a barrel by 0644 GMT.
"This is a meltdown. The weakness is spreading and there is
nowhere to hide outside government bonds and, of course, cash,"
said MF Global analyst Edward Meir.
"But this could be the last big capitulation before prices
steady -- this might a selling climax, but it could still last
all week."
(Additional reporting by Rita Chang, Alison Leung and Rafael
Nam in Hong Kong and David Dolan and Eric Burroughs in Tokyo;
Editing by Jean Yoon)
