TOKYO (AFP) — Growing fears of global recession sent shares plummeting Monday as markets shrugged off fresh government measures to protect shell-shocked economies and a G7 pledge to stabilise the financial system.
The IMF unveiled rescue plans for Ukraine and Hungary, South Korea slashed its key interest rate, Japan announced fresh action to boost its ailing stock market and Australia's central bank intervened to prop up its currency.
The G7 club of rich nations vowed to cooperate to stabilise the system, and voiced concern about "excessive volatility" in the Japanese yen.
Japan's Nikkei index plunged 6.36 percent by the close, hitting the lowest level since October 1982 before the economic bubble.
It was similarly turbulent across Asia. Hong Kong was down 12.2 percent in afternoon trade, Taipei stocks sank 4.65 percent, and Sydney closed down 1.6 percent.
Manila reeled from a plunge of 12.3 percent and Chinese shares closed down 6.32 percent.
"There is more pain left," warned Atul Mehra, head of capital markets with brokerage J M Financial in Mumbai where stocks dropped more than 10 percent to below the psychological 8,000 points barrier.
"The global turmoil does not appear to be resolving soon."
Bucking the trend, Seoul recovered from heavy early losses to close up 0.8 percent after South Korea's central bank cut its key interest rate by 75 basis points -- its largest reduction yet.
The statement by the G7 key economies -- Britain, Canada, France, Germany, Italy, Japan and the United States -- sought to calm nerves by affirming their "shared interest in a strong and stable international financial system."
"We continue to monitor markets closely and cooperate as appropriate," the statement from their finance ministers and central bank chiefs said.
They also warned the yen's volatility posed "possible adverse implications for economic and financial stability," but dealers said the statement had few teeth and may show the G7 had no stomach for intervention.
The currency, which has been rising as investors seek cover from the market turmoil by unwinding bets funded with cheap Japanese credit, stayed at 13-year highs against the dollar, which was trading at 93.46 yen in afternoon trade.
Earlier, Australia's central bank moved to shore up the local dollar after it plunged 3.7 percent against the US currency.
Hong Kong's de facto central bank did likewise for the third time in eight days to maintain the local currency's peg to the greenback.
As well as the rate cut, South Korea said it would press for big tax cuts and spending increases to better shield its export-driven economy from falling global demand.
President Lee Myung-Bak insisted the nation would not face a repeat of the 1997-98 financial crisis, after the local stock market last week suffered its biggest weekly decline and the won plunged to a 10-year low.
In Japan, Prime Minister Taro Aso announced fresh measures to support its stock market, tightening curbs on short-selling and boosting a government fund to pump capital into banks if needed.
He did not specify the amount of new money to inject into banks but Kaoru Yosano, the economic and fiscal policy minister, said Sunday that Tokyo would likely increase it from two to 10 trillion yen (110 billion dollars).
On Sunday, the IMF said it would lend 16.5 billion dollars to Ukraine and would announce a "substantial" package for Hungary in the next few days.
The deals followed a 2.1-billion-dollar loan to Iceland and came amid calls for assistance from other countries including Belarus and Pakistan.
The Washington-based institution has said it can provide up to 200 billion dollars in loans to countries facing financial difficulties.
US and European markets already suffered heavy losses on Friday, with Wall Street's Dow Jones index ending down 3.59 percent, and investors are ready for further turbulence.
The US Federal Reserve is expected to cut interest rates Wednesday from 1.5 percent, but US gross domestic product figures for the third quarter, due for release Thursday, are set to show a decline.
Other key indicators on both sides of the Atlantic and a flood of results and outlooks from US, European and Japanese companies are unlikely to lift the mood.
Copyright © 2009 AFP. All rights reserved. More »
