Markets have seen wild swings this week, with record gains and losses [Reuters]

Japan's benchmark Nikkei index dived more than 10 per cent in early trading on Thursday.

Australia's benchmark S&P/ASX200 was down more than five per cent and share prices in South Korea, Singapore, Taiwan and New Zealand were also sharply lower.

The declines followed another dismal day on Wall Street, with US stocks suffering their worst day since the 1987 stock market crash amid fears that a global recession may not be preventable.

The Dow Jones industrial average closed eight per cent down, or 733 points to 8,577 on Wednesday, despite reports of strong profits from large companies such as Coca-Cola and Intel.

Investors' mood soured after a government report showed that sales at US retailers last month fell by the biggest monthly drop in more than three years.

The news shook the markets as consumer spending accounts for two-thirds of US economic activity.

Recession fears

The head of San Francisco's branch of the US Federal Reserve on Tuesday said that the US economy "appears to be in recession".

"The recent flow of economic data suggests that the economy was weaker than expected in the third quarter, probably showing essentially no growth at all," Janet Yellen said.

"Growth in the fourth quarter appears to be weaker yet, with an outright contraction quite likely," she said. "Indeed, the US economy appears to be in a recession."

Recession is broadly defined in the United States as more than two quarters of decline in real gross domestic product.

"All the good news has now come out," Masatoshi Sato, a broker at Japan's Mizuho Investors Securities, said, referring to the bailouts and rescues. "Attention has now shifted to the real economy."

A handful of countries, including New Zealand, Ireland and Singapore have already confirmed that they are in a recession, while Japan and Germany, the world's second and third-biggest economies, have said they were on the brink of a downturn.

Emergency Asian fund

South-East Asian nations, along with Japan, China and South Korea, agreed to set up a multi-million fund to buy up debts and support the region's banks, Gloria Arroyo, the Philippines president, said on Wednesday.

"The facility can be used to purchase what the bankers call 'toxic assets' and recapitalise troubled financial institutions and private companies," she said.

Arroyo said that the World Bank had committed to initially provide $10bn to the fund.

Analysts said there was no immediate need to recapitalise banks or companies in Asia as few were exposed to the crisis, although Asian financial markets have been badly hit by contagion.

"There is no such pressing need in Asia yet for such a fund. But it is a good development as it will prepare Southeast Asian nations to better take care of any banking problems that may occur," Ritesh Maheshwari, a primary credit analyst at Standard & Poor's rating agency, said.

Governments around the world have pledged around $3.2 trillion in a variety of schemes to combat the worst financial crisis in decades which has caused the failure of several financial institutions around the world.

The leaders of the G8 group of industrialised countries - the US, UK, Germany, France, Italy, Japan, Canada and Russia - said in a statement that changes had to be made to the "regulatory and institutional regimes for the world's financial sectors".

They agreed to hold a summit with other nations soon to discuss the crisis.

Recommend this article...

Did you enjoy this article? Please bookmark it onto:

Be first to comment this article

Write Comment

Please keep the topic of messages relevant to the subject of the article. Personal verbal attacks will be deleted. Please don't use comments to plug your web site. Such material will be removed. Just ensure to *Refresh* your browser for a new security code to be displayed prior to clicking on the 'Send' button. Keep in mind that the above process only applies if you simply entered the wrong security code.
Name:
E-mail
Homepage
Title:
BBCode:
Comment:
Code:*
	I wish to be contacted by email regarding additional comments

Powered by AkoComment Tweaked Special Edition v.1.4.4