Wall Street investors waited anxiously for the stock market to open Wednesday, after a plunge of more than 2 percent, or 277 points on Tuesday.
Investors braced for the worst on disappointing estimates of technology earnings.
The Asian markets followed the U.S. plunge, with Hong Kong's chief index losing 5.4 percent and Tokyo's Nikkei down 3.4 percent on concerns that the U.S. economy may be headed for a recession.
Investors dumped stocks after an overnight sell-off on Wall Street and on news that Citigroup Inc. had lost nearly $10 billion in the fourth quarter as it wrote down mountains of bad mortgage assets — the latest fallout from the credit crisis. Weak U.S. retail sales figures added to the gloom.
Recession Fears
"American financial mismanagement has brought us to this economic meltdown," said Francis Lun, a general manager at Fulbright Securities in Hong Kong. "Asian stock markets are all suffering; nobody has escaped."
Stocks in Europe also fell sharply. Britain's FTSE 100 and Germany's DAX were both down about 1.2 percent in morning trading.
Concerns about the U.S. financial system were also felt in the currency market, which sent the dollar below 106 yen, its lowest in more than two years.
Investors saw more damage from the credit crisis when Citigroup said Tuesday it had written down $18.1 billion in bad assets. That helped send the Dow Jones industrial average down 277 points, or 2.2 percent, to 12,501.11.
Citigroup Fallout
"The fallout from the Citigroup result is significant, with many saying ... there is more bad news to come," said Trent Muller, an ABN Amro Morgans analyst in Sydney.
There is also growing fear that the Federal Reserve hasn't done enough to keep the U.S. economy going. The central bank has lowered its key interest rate by a full percentage point to 4.25 percent since early August.
Now many investors and analysts believe the Fed will cut rates by a half-point at its Jan. 29-30 meeting.
But some believe the concerns about a possible U.S. recession — and its impact on Asia — were overblown.
Ernie Hon, a strategist with ICEA Securities in Hong Kong, said he expected any U.S. economic slowdown would be temporary and have limited effect on Asia. Strong demand from within the region and the Middle East would offset slowing demand from the U.S., he said, blaming the market drop on investor jitters.
"The recession will only last for one to two quarters because the U.S. will continue to cut rates and inject money into its banking system," he said.
From NPR reports and The Associated Press
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