U.S. & World

HONG KONG (AP) ― Asian markets plunged Wednesday on growing speculation the U.S. economy — a vital export market — is sliding into a recession that could lead to a global slowdown.

Investors dumped stocks after an overnight sell-off on Wall Street and on news that Citigroup Inc. had lost nearly $10 billion in the fourth quarter as it wrote down mountains of bad mortgage assets — the latest fallout from the credit crisis. Weak U.S. retail sales figures added to the gloom.

"American financial mismanagement has brought us to this economic meltdown," said Francis Lun, a general manager at Fulbright Securities in Hong Kong. "Asian stock markets are all suffering; nobody has escaped."

In Hong Kong, the benchmark Hang Seng index sank 5.4 percent — its biggest percentage drop since the Sept. 11, 2001, terrorist attacks — to 24,450.85. Tokyo's Nikkei 225 index fell 3.4 percent to 13,504.51 points, its lowest in more than two years.

Markets in Australia, China, India, South Korea, New Zealand and the Philippines also dropped sharply on uncertainty about the U.S. economic outlook and the full extent of the subprime mortgage crisis.

In Europe, where markets had fallen sharply Tuesday, stocks slid again. Britain's FTSE 100 and Germany's DAX were both down about 1.2 percent in morning trading.

Concerns about the U.S. financial system were also felt in the currency market, which sent the dollar below 106 yen, its lowest in 2 1/2 years.

Investors saw more damage from the credit crisis when Citigroup said Tuesday it had written down $18.1 billion in bad assets. That help send the Dow Jones industrial average down 277 points, or 2.2 percent, to 12,501.11.

"The fallout from the Citigroup result is significant, with many saying ... there is more bad news to come," said Trent Muller, an ABN Amro Morgans analyst in Sydney.

There is also growing fear that the Federal Reserve hasn't done enough to keep the U.S. economy going. The central bank has lowered its key interest rate by a full percentage point to 4.25 percent since early August.

Now many investors and analysts believe the Fed will cut rates by a half-point at its Jan. 29-30 meeting.

But some believed the concerns about a possible U.S. recession — and its impact on Asia — were overblown.

Ernie Hon, a strategist with ICEA Securities in Hong Kong, said he expected any U.S. economic slowdown would be temporary and have limited effect on Asia. Strong demand from within the region and the Middle East would offset slowing demand from the U.S., he said, blaming the market drop on investor jitters.

"The recession will only last for one to two quarters because the U.S. will continue to cut rates and inject money into its banking system," he said.

Still, in Tokyo, the region's biggest market, semiconductor stocks fell after Intel Corp. shares plunged overnight.

And worries about the yen's appreciation contributed to big declines in major Japanese exporters Honda Motor Co., which shed 4.9 percent, and Sony Corp., which plunged 6.8 percent.

"The Tokyo market is very sensitive to the strong yen," said Daiwa Securities Co. analyst Tsuyoshi Nomaguchi.

In China, the benchmark Shanghai Composite Index fell 2.8 percent to 5,290.60. The index has gained 0.6 percent since the beginning of the year, compared with losses in nearly all other Asian markets.

"The U.S. market certainly influenced mainland Chinese markets due to its impact on Hong Kong shares. That's the main reason for today's decline," said Peng Yunliang, a senior analyst at Shanghai Securities.

But the impact is mainly limited to major bank and insurance companies whose shares are listed in both Shanghai and Hong Kong. Overall, China's share prices have strong support from domestic demand, she said.

"Other stocks like pharmaceuticals, energy, resources and tourism are all continuing to gain thanks to strong demand," Peng said.

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