TOKYO – Japan's stock market plummeted 9.4 percent — its biggest one-day drop in 21 years — Tuesday as investors rushed for the exits on deepening fears over the global financial crisis.
The benchmark Nikkei 225 index nose-dived 952.58 points to 9,203.32, a five-year low. That was its third-biggest drop in percentage terms and largest plunge since October 1987.
The carnage was also brutal in Hong Kong, where the blue chip Hang Seng index plunged 5.6 percent to 15,871.
To ease the credit crunch, Hong Kong's de factor central bank said it will cut the benchmark interest rate by 1 percentage point to 2.5 percent.
Asian markets were deep in the red: South Korea's benchmark index was down 6.1 percent, Thailand's market was down 6 percent, and Indonesia's stock market halted trading when its key index plunged 10 percent.
In Europe, markets tumbled in early trading Wednesday amid ongoing fears about the state of credit markets despite the British government's $87.5 billion rescue package for the banking system
By mid-morning London time, the CAC-40 index in France was 229.33 points, or 6.1 percent, lower at 3,502.89, while Germany's DAX was down 323.99, or 6.1 percent, at 5,002.64. The FTSE 100 index of leading British shares was 237.22, or 5.2 percent lower, at 4,367.50.
The selling tide was so huge that the Paris stock exchange briefly suspended calculating the benchmark CAC-40 index amid a massive influx of sell orders that caused it to plummet nearly 8.2 percent at one stage. Orders passed a threshold of 35 percent of the total market value of the 40 blue-chip stocks that make up the index, triggering an automatic halt in the calculation under exchange rules, exchange spokeswoman Frederique Vigezzi said.
And Moscow's MICEX stock exchange, where most of Russia's trading takes place, announced it is shutting until Friday after opening with steep losses. The MICEX index dropped more than 14 percent in the first half-hour of trading Wednesday.
The RTS exchange, whose index is widely considered the benchmark of Russia's markets, fell more than 11 percent in the first 30 minutes and suspended trading until further notice.
"We've got a financial market meltdown and an extreme lack of confidence in banks and in markets," said Neil Mackinnon, chief economist at ECU Group.
The massive sell-off in Tokyo follows a plunge on Wall Street Tuesday, when the Dow Jones industrial average lost more than 5 percent despite steps by the Federal Reserve to reinvigorate dormant credit markets.
"Selling on Wall Street triggered further selling in Tokyo. It's like a chain reaction," said Kazuhiro Takahashi, general manager at Daiwa Securities SMBC Co. Ltd.
"No one knows the bottom of the ongoing financial crisis, and investors were really spooked by growing uncertainty over the global credit crisis," he said.
Selling accelerated as investors were pessimistic that the finance ministers and central bankers from the Group of Seven industrialized nations would announce any effective measures at their meeting in Washington on Friday to tackle the global financial crisis, Takahashi said.
"Investors were taking a wait-and-see approach over the upcoming meeting, but today's massive selling indicated that they were not so hopeful for concrete action by the G7," he said.
The Nikkei index has lost a staggering 24 percent in the last two weeks.
Among biggest losers, Toyota Motor Corp. plunged almost 12 percent to 3,280 yen on media reports that Japan's top automaker's operating profit would fall 40 percent this fiscal year through March due to sluggish demand in the U.S. market.
Toyota's rival, Nissan Motor Co., also dropped 9.9 percent, to 501 yen. Honda Motor Co. lost 10.31 percent to 2,305 yen.
The dollar briefly fell below the 100-yen level for the first time in six months as jittery investors dumped the greenback.
Australia's benchmark S&P/ASX200 shed 5 percent, wiping out a 1.7 percent gain on Tuesday after the country's central bank cut its key interest rate by a larger-than-expected 1 percentage point.
Investors in Indonesia seemed to be dismissing comments by the central bank governor Tuesday that Indonesia will avoid the worst of the global credit crisis. On Tuesday, the central bank raised interest rates a quarter percentage point, citing a two-year high in inflation.
"People are very, very nervous that Europe will get belted tonight as they didn't see a lot of the late losses in the U.S. session, and people just think it's going to get worse," said Ric Klusman, an institutional dealer with Aequs Securities in Sydney.
In New York Tuesday, the Dow lost more than 5 percent despite efforts by the Federal Reserve to reinvigorate the dormant credit markets by invoking emergency powers to lend money to companies outside the financial sector and buy up mounds of commercial paper, the short-term debt that firms use to pay for everyday expenses like salaries and supplies.
Federal Reserve Chairman Ben Bernanke warned in a speech Tuesday that the financial crisis could prolong the difficulty the economy is facing. While his remarks were widely regarded as a sign that an interest rate cut could be in the offing, Wall Street appeared little comforted and focused on his downbeat assessment.
In currencies, the dollar weakened slightly to 101.25 yen in Asia early Wednesday afternoon from 101.38 yen late Tuesday. The euro stood at $1.3585 compared with $1.3550.
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