- The Washington Times - Tuesday, April 21, 2009

HONG KONG (AP) - Asian stock markets tumbled Tuesday, with benchmarks in Tokyo and Hong Kong down 2-3 percent, after news of mounting bad loans at Bank of America rekindled worries about the financial system and halted Wall Street’s six-week rally. European markets traded higher.

Selling spread across Asia, with shares in financials, exporters and commodity firms all suffering sharp losses, as investors clamored to sell following an enormous run-up in global equities since early March. Oil prices were little changed after plummeting overnight, while the dollar gained slightly against the yen.

Investors reverted to worrying about the banking industry after Bank of America, while posting a profit in the first quarter, said it was setting aside $13.4 billion to cover losses from souring loans.

The news raised the specter of more colossal write-downs as defaults climb and left many questioning the quality of better-than-expected earnings from other major banks that had cheered Wall Street just a week ago.There was also growing anxiety the results of the government’s “stress tests,” to be released in May, will show many banks are still in dire straits and may need more government bailout money.

Investors had plunged headlong into the market recently amid speculation the recession will end sooner than originally thought. Whether Tuesday’s correction is the start of another stretch lower or an aberration in a bull market remains to be seen.

But well-known U.S. economist Nouriel Roubini, among the few experts to foresee the current crisis, was skeptical. He said the results of the government’s bank stress tests, along with further decay in the U.S. economy and surprisingly bad corporate earnings this year, will lead some markets to test the lows reached in March.

“For people who say there are green shoots, I see only yellow weeds frankly,” Roubini said at a conference in Hong Kong Tuesday. “It’s not a true recovery. It’s just a bear-market rally, it’s a suckers rally.”

European markets were modestly higher in early trade, with Britain’s FTSE 100 up 0.3 percent, Germany’s DAX adding 0.7 percent and France’s CAC-40 rising 0.7 percent.

Wall Street futures recovered from the red to trade slightly higher, helping Asian markets trim some of their losses. Still, most Asian markets closed lower.

Japan’s Nikkei 225 stock average lost 213.42 points, or 2.4 percent, to 8,711.33, and Hong Kong’s Hang Seng shed 465.02 points, or 3 percent, to 15,285.89.

Elsewhere, Australia’s main index fell 2.4 percent, Shanghai’s stock measure retreated 0.9 percent and South Korea’s Kospi ended almost flat.

As in the U.S., Asian investors targeted financials on concerns of further distress in the banking sector. Heavyweight HSBC fell 5.3 percent in Hong Kong, while Japan’s biggest bank, Mitsubishi UFJ Financial Group Inc., dropped 1 percent.

Among exporters, Toyota Motor Corp. lost 3.9 percent after reports the automaker’s domestic output this fiscal year is likely to fall to the lowest level in more than three decades. As a result, the company will have difficulty maintaining its entire full-time work force, according to the top-selling Yomiuri newspaper.

Resources were also lower, hit by sinking prices for metals and crude. Australia’s BHP Billiton Ltd, the world’s largest mining company, shed 4 percent.

Overnight in New York, financials dragged the Dow Jones index lower as shares in Bank of America and Citigroup both lost about 20 percent or more.

The Dow fell 289.60, or 3.6 percent, to 7,841.73.

Broader stock indicators also lost ground. The Standard & Poor’s 500 index fell 37.21, or 4.3 percent, to 832.39, and the Nasdaq composite index fell 64.86, or 3.9 percent, to 1,608.21.

Oil prices languished below $46 a barrel Tuesday in Asia. Benchmark crude for May delivery fell 15 cents to $45.73 a barrel.

After trading near $50 a barrel so far this month, oil prices plunged $4.45 on Monday to settle at $45.88, following a broad sell-off of stocks.

In currencies, the dollar weakened to 98.14 from 97.99. The euro was higher at $1.2946 from $1.2918.

___

AP Writer Tomoko A. Hosaka contributed to this report.

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