Asian stocks sink on fresh fears of US recession

Asian stock markets were sharply lower Friday amid signs of a possible U.S. recession and renewed worries over the health of Europe's banks.

Oil prices fell to near $81 a barrel in Asia, extending a major sell-off fueled by investor fears that slowing global growth will undermine demand for crude. The dollar was higher against the euro but down against the yen.

Japan's Nikkei 225 index dropped 1.8 percent to 8,784.53 and Hong Kong's Hang Seng slid 2.4 percent to 19,540.60. South Korea's Kospi dived 4.5 percent to 1,775.71. Australia's benchmark S&P/ASX 200 was down 2.7 percent at 4,137.70.

Financial markets have wrestled for several weeks with fears that a new recession in the U.S. is in the offing. The number of people filing claims for unemployment benefits rose to 408,000 last week, an increase of 9,000 from the week before. Inflation is on the march higher while housing sales remained in the doldrums.

Still, analysts did not expect Asia's emerging economies — which are mostly enjoying robust growth — to be derailed by the current woes in the West.

"It's been a global disaster for stock markets in the past few weeks," said Linus Yip, a strategist at First Shanghai Securities in Hong Kong. "But it's not so bad in Asia. In mainland China, GDP growth is slowing down but still holds around 9 percent. So I don't think it's so bad in Asia, especially emerging markets."

The raft of bad economic news sparked a sell-off on Wall Street on Thursday. The Dow Jones industrial average fell 3.7 percent to 10,990.58. The Standard & Poor's 500 index fell 4.5 percent to 1,140.65. The Nasdaq composite fell 5.2 percent to 2,380.43.

In Asia, energy shares were hammered amid fears that demand would dry up if the world economy throttles back. Hong Kong-listed PetroChina Ltd., the country's biggest oil and gas company, lost 3.3 percent. CNOOC, China National Offshore Oil Corp., fell 3.7 percent. Energy Resources of Australia was down 3.5 percent.

Mainland Chinese shares tracked the declines elsewhere, with shares in coal, oil and cement leading the losses. The Shanghai Composite Index lost 1.3 percent to 2,525.53 while the Shenzhen Composite Index lost 1.3 percent to 1,128.02.

"Today's loss will be short-lived, it's just due to the crash in the U.S. market. Actually, China is not facing any big economic problems and Vice President Xi Jinping has encouraged investors to be more confident about the market, which means a lot," said Peng Yunliang, an analyst based in Shanghai.

European bank stocks tanked Thursday as fears mounted about their exposure to the region's spiraling debt crisis, which has dragged on for nearly two years and resulted in a string of sovereign bailouts worth hundreds of billions of euros.

Banks have also been under pressure because German Chancellor Angela Merkel and French President Nicolas Sarkozy said earlier this week that their countries were developing a plan to tax financial transactions.

Asian bank stocks followed their European counterparts lower. Hong Kong-listed Bank of China Ltd. slid 3.2 percent, while the Industrial and Commercial Bank of China, the world's biggest bank by market value, lost 2 percent. Commonwealth Bank of Australia Ltd., the nation's largest lender, fell 2.3 percent.More...