Global stock markets tumbled on Friday as fears mounted of a collapse of the Big Three US automakers after the US Senate refused to throw them a financial lifeline, traders said.
Share prices plunged in Asia and at the start of European trade after hours of late-night negotiations among US senators on a bailout of the troubled industry collapsed.
The US dollar in turn fell sharply, hitting a 13-year low against the yen.
PHOTO: AP
“It’s a very bad sign. US stocks will likely nosedive,” said Yasutoshi Nagai, chief economist at Daiwa Securities SMBC.
Wall Street will reopen at 1430 GMT after losing 2.24 percent on Thursday.
Tokyo’s Nikkei index slumped by more than 7 percent at one point as the dollar tumbled below the key ¥90 level for the first time since 1995.
The Japanese benchmark ended down 5.6 percent as exporters reeled from the stronger yen, which undercuts their overseas earnings.
Hong Kong shares closed down 5.48 percent, Seoul dived 4.38 percent and Sydney was off 2.4 percent.
Elsewhere in the Asia-Pacific yesterday, Taipei ended down 3.7 percent, Shanghai closed down 3.81 percent, Wellington lost 1.8 percent and Manila dropped 2.0 percent.
In early European trade, London dived 4.07 percent, Frankfurt tumbled 4.16 percent, Paris lost 4.74 percent, Madrid gave up 3.93 percent and Zurich lost 3.91 percent.
A US$14 billion deal passed the House of Representatives this week but it faced stiff opposition from senators in US President George W. Bush’s Republican Party.
“I’m terribly disappointed that we are not able to arrive at a conclusion,” said Senate Majority Leader Harry Reid, a member of president-elect Barack Obama’s Democratic Party. “We have tried very, very hard to arrive at a point where we could legislate for the automobile industry.”
Japan was also reportedly set today to raise its own stimulus package to ¥40 trillion (US$437 billion) from ¥26.9 trillion as the outlook rapidly worsens in Asia’s largest economy.
Investors reacted cautiously to the reports, noting that Prime Minister Taro Aso — who unveiled a ¥26.9 trillion boost in late October — is struggling amid voter discontent with his handling of the economy.
Aso “is already a lame duck,” said Hideaki Higashi, a strategist at SMBC Friend Securities. “We do not know how seriously we should believe the reported measures would be implemented.”
In China, shares closed down 3.81 percent yesterday due to concerns about weak fourth quarter earnings and Beijing’s lack of new economy-boosting measures, dealers said.
China’s retail sales growth eased to 20.8 percent last month from 22.0 percent in October, reinforcing concerns that consumption in the world’s fourth-largest economy was slowing.
“Many investors chose to sell as China’s economy has shown clear signs of further slowdown, and corporate earnings in the fourth quarter will be poor,” TX Investment’s Wu Feng said.
The benchmark Shanghai Composite Index, which covers A and B shares, closed down 77.47 points at 1,954.22 on turnover of 73.4 billion yuan (US$10.7 billion).
In New York on Thursday, the Dow Jones Industrial Average slid 2.24 percent as investors fretted over the rescue plan for the troubled US auto industry.
Market nervousness was reinforced by news that US jobless claims in the past week soared to a fresh 26-year high of 573,000, well above expectations.
There was also disappointment that the trade deficit widened 1.1 percent in October to US$57.2 billion, with both exports and imports down, suggesting demand is falling worldwide.
The sharp drop on Asian markets wiped out several days of gains. Japan’s Nikkei index is now down 46.5 percent this year while Hong Kong’s Hang Seng is off almost 48 percent.
CHANGE OF MIND: The Chinese crew at first showed a willingness to cooperate, but later regretted that when the ship arrived at the port and refused to enter Togolese Republic-registered Chinese freighter Hong Tai (宏泰號) and its crew have been detained on suspicion of deliberately damaging a submarine cable connecting Taiwan proper and Penghu County, the Coast Guard Administration said in a statement yesterday. The case would be subject to a “national security-level investigation” by the Tainan District Prosecutors’ Office, it added. The administration said that it had been monitoring the ship since 7:10pm on Saturday when it appeared to be loitering in waters about 6 nautical miles (11km) northwest of Tainan’s Chiang Chun Fishing Port, adding that the ship’s location was about 0.5 nautical miles north of the No.
A Chinese freighter that allegedly snapped an undersea cable linking Taiwan proper to Penghu County is suspected of being owned by a Chinese state-run company and had docked at the ports of Kaohsiung and Keelung for three months using different names. On Tuesday last week, the Togo-flagged freighter Hong Tai 58 (宏泰58號) and its Chinese crew were detained after the Taipei-Penghu No. 3 submarine cable was severed. When the Coast Guard Administration (CGA) first attempted to detain the ship on grounds of possible sabotage, its crew said the ship’s name was Hong Tai 168, although the Automatic Identification System (AIS)
An Akizuki-class destroyer last month made the first-ever solo transit of a Japan Maritime Self-Defense Force ship through the Taiwan Strait, Japanese government officials with knowledge of the matter said yesterday. The JS Akizuki carried out a north-to-south transit through the Taiwan Strait on Feb. 5 as it sailed to the South China Sea to participate in a joint exercise with US, Australian and Philippine forces that day. The Japanese destroyer JS Sazanami in September last year made the Japan Maritime Self-Defense Force’s first-ever transit through the Taiwan Strait, but it was joined by vessels from New Zealand and Australia,
COORDINATION, ASSURANCE: Separately, representatives reintroduced a bill that asks the state department to review guidelines on how the US engages with Taiwan US senators on Tuesday introduced the Taiwan travel and tourism coordination act, which they said would bolster bilateral travel and cooperation. The bill, proposed by US senators Marsha Blackburn and Brian Schatz, seeks to establish “robust security screenings for those traveling to the US from Asia, open new markets for American industry, and strengthen the economic partnership between the US and Taiwan,” they said in a statement. “Travel and tourism play a crucial role in a nation’s economic security,” but Taiwan faces “pressure and coercion from the Chinese Communist Party [CCP]” in this sector, the statement said. As Taiwan is a “vital trading
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