TOKYO, October 28 – Asian stock markets were mostly lower in early trade on Tuesday, a day after steep falls, as investors braced themselves for a severe worldwide economic downturn.,
"Global equities will trend downwards until they reflect a deep global recession," said Dariusz Kowalczyk, chief investment strategist at CFC Seymour in Hong Kong.
Japan\’s Nikkei index sank below the key 7,000-point level briefly for the first time in 26 years in volatile trading. By lunch it was down 0.95 percent.
In early trade, shares sank 4.7 percent in Taipei, 3.1 percent in Seoul, 1.9 percent in Shanghai and 1.7 percent in Sydney. Singapore, which was shut on Monday, suffered a 6.7 percent loss.
Hong Kong rebounded 3.5 percent, but traders said it was no surprise after Monday\’s huge 12.7 percent plunge.
Investors took their cue from Wall Street where the Dow Jones dropped 2.42 percent overnight to end at 8,175.77, while the broad-market Standard & Poor\’s 500 index lost 3.18 percent to 848.92.
The S&P index would need to drop to about 750 points before it reflected "the severity of the recession we are entering," Kowalczyk said.
"As long as US equities are going down, so will all other stock markets," he warned.
US stocks ended lower Monday despite news that the US Treasury was preparing to inject some 125 billion dollars into nine major banks this week as part of a massive rescue plan.
There was also a surprise 2.7 percent month-on-month gain in new home sales in the United States in September, although sales were still down more than 30 percent from a year earlier.
The euro remained under pressure, dropping to 1.2328 dollars, the lowest level since April 2006.
It later recovered slightly to 1.2357 dollars, still sharply lower compared with its level of 1.2520 dollars in New York overnight.
Worries about the health of the eurozone economies grew following a very weak German business confidence survey.
The Japanese currency continued to rise as investors exited risky assets and sought shelter from the financial crisis.
The dollar fell to 92.82 yen in Tokyo morning trade, down 1.1 percent from its level in New York late Friday. The euro dropped 2.3 percent to 114.81 yen.
The Australian dollar also remained weak due to "fears of a deep and prolonged global recession," said NAB Capital analyst John Kyriakopoulos.
Cash-strapped funds were selling their assets and returning cash to the United States and Japan, boosting the yen and the dollar, he said.
European markets saw volatile trading Monday. The London FTSE index plunged more than 5.0 percent at one point but escaped with a loss of just 0.79 percent by the close. The Paris CAC 40 ended down 3.96 percent.
Emerging markets remained under pressure. Mexico\’s central bank on Monday announced a financial stability plan including an increase in its foreign debt of up to five billion dollars.