HONG KONG, (AP) – World stock markets tumbled Thursday, with Japan’s benchmark off nearly 5 percent, as abysmal U.S. holiday sales and fresh banking troubles magnified fears about the global economy.
Every market across Asia suffered steep declines, with broad-based selling hitting industries from energy to financials to exporters. A record drop in Japanese machinery orders pointed to a deepening recession in the world’s No. 2 economy, while oil prices continued to fall on worries that the economic slump will further weaken demand for crude. The dollar slid further against the yen.
European markets retreated in early trade, though the losses weren’t as steep, ahead of an expected rate cut from the European Central Bank later Thursday. Britain’s FTSE 100 shed 0.9 percent, Germany’s DAX lost 1.1 percent and France’s CAC-40 fell 0.9 percent.
Sentiment was pummeled after a U.S. government report showed retail sales dropped 2.7 percent last month, more than double the decline economists had expected and providing alarming new evidence that American consumers are pulling back their spending.
Following one of the biggest consumption binges by any one country in modern history, fueled by rising homes values and easy credit, the U.S. was now reeling from its worst-ever consumer recession, said Stephen Roach, chairman of Morgan Stanley Asia Ltd.
“The American consumer is — as we say in the U.S. — toast, finished, done,” Roach said Thursday in Hong Kong. “The consumer is going down for the count here, and there’s more to come.”
Meanwhile, a flood of negative news in the financial industry reignited worries that international banks would suffer ever-bigger losses and be forced to raise billions more in capital as the world economy deteriorates.
Deutsche Bank AG, Germany’s biggest bank, on Wednesday reported a 4.8 billion euro ($6.4 billion) loss for the fourth quarter, blaming “exceptional market conditions.” Analysts said HSBC Holdings PLC, Europe’s largest bank, may have to raise $20 billion to $30 billion and slash its dividend.
In the U.S., reports surfaced late Wednesday that the government was closed to supplying Bank of America Corp., the nation’s biggest bank by assets, with billions of dollars more in aid after it agreed to acquire debt-ridden Merrill Lynch & Co.
“Everybody is worried the global recession will hurt bank earnings because of bad debt,” said Francis Lun, general manager of Fulbright Securities Ltd. in Hong Kong. “And retail sales are very bad. Things are bad for everybody.”
In Tokyo, the Nikkei 225 stock average fell 415.14 points, or 4.9 percent, to 8,023.31, with sentiment further hurt by new figures showing that Japanese machinery orders, a closely watched indicator of corporate spending, plunged to a record 16.2 percent in November.
Elsewhere, Hong Kong’s Hang Seng Index fell 461.65 points, or 3.4 percent, to 13,242.96 after earlier sinking about 5 percent. South Korea’s Kospi dived 6 percent to 1,111.34, while markets in Australia and Taiwan fell 4 percent or more. Singapore’s benchmark was down 3.4 percent but Shanghai stocks were only slightly lower.
In financials, HSBC skidded 5.7 percent in Hong Kong trade to a multiyear low, and South Korea’s KB Financial Group Inc., the holding company for top lender Kookmin Bank, plunged 8.9 percent.
Falling prices for oil and metals pulled down commodity producers, with Rio Tinto, the world’s No. 3 mining company, tanking 8.2 percent in Australia following a significant drop in iron ore output during the fourth quarter.
Major Chinese oil firms, including PetroChina and CNOOC, sank 5 percent or more in Hong Kong.
In Japan, Sony Corp. shed 5.2 percent, while electronics maker Nikon Corp. lost 6.8 percent and Canon Inc. fell 5.9 percent.
Asia’s sell-off followed trade the day before in Europe and the U.S., where the Dow Jones index fell 248.42, or 2.9 percent, to 8,200.14, its lowest close since Dec. 1. All 30 stocks that make up the Dow fell. The S&P 500 fell 29.17, or 3.4 percent, to 842.62.
With U.S. futures lower, Wall Street was poised to add to its losses. Dow futures were off 79 points, or 1 percent, at 8,080 while S&P500 futures fell 7.4 points, or 0.9 percent, to 832.40.
Oil prices lost ground again, with light, sweet crude for February delivery off 82 cents at $36.46 a barrel in Asian trade. The contract lost 50 cents to settle at $37.28 overnight on demand concerns after a government report showed that crude inventories continued to grow.
In currencies, the dollar slipped to 88.72 yen, down from 89.13 yen, and the euro fell to $1.3170 from $1.3199.