Global stocks tumble as bad news stacks up

Asian stocks plunged Thursday, dragged down by heavy losses on Wall Street after the US government dropped a plan to buy up toxic mortgage
assets and new signs of recession emerged in Europe.

A profit warning from the biggest US consumer electronics retailer, Best Buy, also sapped confidence, which was already fragile following weeks of market turmoil sparked by a global credit crunch.

"The announcement by Best Buy fuelled worries over corporate earnings when consumers are heading to the year-end shopping season," said Motoki Ichikawa, investment information chief at SMBC Friend Securities.

Washington's U-turn on the financial bailout plan "also came out of the blue, discouraging investors," he said.
Stocks tumbled 5.1 percent in Tokyo by lunch as Hong Kong shares sank 6.5 percent in early trade. Seoul slumped 5.6 percent while Sydney was 4.1 percent in the red.

Markets around the region were mired in losses after Wall Street's Dow Jones Industrial Average sank 4.73 percent on Wednesday after a raft of gloomy corporate news and the shift in the bailout strategy.

"It looks like world markets will take another leg down in the next few days," Goldman Sachs JB Were senior sales trader Patrick Crabb in Melbourne told Dow Jones Newswires.

"We passed through the eye of the hurricane, and are now back feeling the full force of the storm."

Treasury Secretary Henry Paulson said the Wall Street bailout plan would be refocused on continued capital injections for ailing banks and possible steps to help the non-bank financial sector, such as car loans and credit cards.

"It is shocking to see the US government deciding not to use any of the 700 billion dollars on buying mortgage-related assets, which were the primary reason for the bailout package," Dariusz Kowalczyk, chief investment strategist at CFC Seymour in Hong Kong, wrote in a note to clients.

"Declining house prices and falling values of mortgage-related securities are the primary reason for the current crisis, and abandonment of attempts to tackle these problems head-on will prolong the recession."

Paulson ruled out using part of the 700-billion-dollar rescue package for the troubled auto sector, which has warned it will soon run out of cash. The White House refused to say whether US auto giants were too big to fail.

China meanwhile reported a sharp slowdown in industrial production growth -- the latest sign that the Asian economic powerhouse is losing steam.

Premier Wen Jiabao was quoted in the state media as saying the impact of the global financial woes on China's economy was "worse than expected."

European stock markets dropped on Wednesday, as the Bank of England said the British economy was likely in recession.
In Germany, the eurozone's largest economy, a panel of top economists warned that economic growth would grind to a halt in 2009.

The London FTSE 100 index fell 1.52 percent, the Paris CAC 40 fell 3.07 percent and the Frankfurt Dax dropped 2.96 percent.

Investors were turning their attention to a summit on the financial crisis that will bring together leaders of the Group of 20 industrialised and emerging nations from Friday in Washington.

Japan will offer at the meeting to lend up to about 100 billion dollars to the International Monetary Fund to help boost loans to emerging countries hit hard by the financial crisis, local media reports said.