On Thursday 12 August 2010, 11:01 SGT
Fresh doubts over the durability of the global economic recovery sent a chill through Asian markets Thursday, as shares tumbled and the dollar teetered near 15-year lows against the yen.
The region followed heavy overnight falls in the US and Europe after the Bank of England lowered its growth forecast for this year and investors shunned risk on signs of slowing industrial growth and rising inflation in China.
A sharp widening of the US trade deficit added to the gloom, triggering fears of a double-dip recession.
Shares in Tokyo tumbled 2.02 percent by the break, while Seoul was off 1.01 percent and Sydney slipped 1.42 percent. Hong Kong shares were 1.09 percent down in early trade.
The markets' grim assessment was also coloured by the downbeat view taken by the US Federal Reserve Tuesday, which warned that recovery in the world's largest economy was slowing and opted for further stimulus measures.
"There have been mounting fears over a US economic slowdown," Greg Gibbs, currency strategist at RBS in Sydney, told Dow Jones Newswires.
"The bottom line is that there are still plenty of reasons to be fearful for the state of the global economy and financial system," he said.
The region followed Wall Street's 2.5 percent dive overnight as data showing the US trade gap had widened sharply in June -- to the highest level in 20 months on the back of rising imports -- rekindled fears of a second-dip recession.
After hitting a 15-year low against the Japanese currency, the dollar struggled to lift itself beyond the psychological 85 yen level Thursday.
Having plunged to 84.73 yen overnight as market players sought a safe-haven, the greenback was changing hands at 84.97 yen in Tokyo morning trade.
The euro fetched 1.2867 dollars, unchanged from New York where the single European currency tumbled below the sensitive 1.30-dollar level. Against the Japanese unit, the euro fell to 109.40 from 109.73.
"The yen has attracted money amid concerns over the US and European economies," said Hideaki Inoue, dealer at Mitsubishi UFJ Trust and Banking.
The strong yen poses a threat to the export sector driving Japan's own fragile economic rebound, with companies facing huge hits to overseas profits when repatriated.
Japanese factory output has slowed recently amid the global uncertainty, while data on Wednesday saw much lower than expected orders for machinery in a sign of cautious capital spending.
Sony was off 3.03 percent, Canon was down 1.12 percent and the world's biggest automaker Toyota slid 1.15 percent.
"China and the US and Europe are three flashpoints around the world that investors are continually nervous about," said CMC Markets analyst David Taylor.
"What we've seen in the last 48 hours is some of those fears of the slowdown in those economies being realised."
Oil prices slipped further in Asian trade. New York's main contract, light sweet crude for delivery in September, shed 81 cents to 77.21 dollars a barrel.
Brent North Sea crude for September delivery retreated 83 cents to 76.81 dollars.
Gold opened slightly higher at 1,199.50-1,200.50 US dollars an ounce on Thursday, up a touch from Wednesday's closing price of 1,198.50-1,199.50 dollars.
burs-dwa/hg
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