Asian markets tumble as U.S. financial shockwave continues
HONG KONG -- Asia stocks fell on Thursday, but erased early sharp losses, amid worries that more companies could succumb to the financial crisis that forced the U.S. to bail out insurer American International Group Inc.
European stocks opened higher as Europe's major central banks banded together with counterparts in Japan, the U.S. and Canada to inject as much as $180 billion into global money markets in a bid to stave off the growing crisis.
Hong Kong's Hang Seng Index, which sank more than 7% at one point, closed virtually flat at 17,632 points. Tokyo's Nikkei 225 index, also paring early losses, ended down 2.2% to 11,489.30, a three-year low.
Investors were shaken by the Federal Reserve's $85 billion emergency loan to AIG, the huge U.S. insurer that lost billions in the risky business of insuring against bond defaults and became the latest victim of the historic financial turmoil that's engulfed Wall Street over the last year.
The crisis, a result of problems with souring mortgage debt and restricted credit, has already brought down Wall Street giants Lehman Brothers, Merrill Lynch and Bear Stearns. The two independent investment banks left standing — Morgan Stanley and Goldman Sachs Group — remained under scrutiny.
"It's a complete collapse of confidence," said Francis Lun, general manager of Fulbright Securities Ltd in Hong Kong. "The financial crisis in the U.S. is hitting everyone, everyone is running for cover. If the largest insurance company can fail, than no one is safe."
But the move by major central banks boosted the confidence of some investors, possibly contributing to the late-day recovery in some markets. Lloyds TSB PLC's 12.2 billion-pound ($21.85-billion) deal to take over struggling HBOS PLC, Britain's biggest mortgage lender, also helped sentiment.
European stocks rose in early trading, with Britain's FTSE-100 up 1.3% and Germany's DAX up 0.3%.
Mitsuru Shimizu, deputy general manager at Cosmo Securities in Tokyo, said efforts by central banks to calm financial market jitters appeared to help restore confidence.
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