Asian stocks tumbled as much as 4 per cent on Friday on growing fears that the U.S. economy was sliding into recession and as some European lenders faced short-term funding strains, raising fears of a systemic banking crisis on the continent.
Gold jumped to a fresh high of $1,836.46 an ounce and U.S. Treasuries surged as investors rushed into safe-havens after heavy losses on U.S. and European markets overnight.
The precious metal has gained about $350 per ounce since July 1 as investors recoiled from riskier assets.
S&P 500 futures fell 0.8 per cent in Asia, adding to a slump of nearly 4.5 per cent overnight and pointing to more losses for battered Western markets later in the day.
The MSCI global stock index fell 0.6 per cent, taking its losses since late July to around 15 per cent.
European equities suffered their biggest daily slide in 2½ years on Thursday.
In Asia on Friday, Japan’s Nikkei 225 index fell 2.1 per cent for a third day of declines, while stocks elsewhere in Asia as measured by MSCI lost 2.9 per cent, taking their losses to nearly 15 per cent in August.
But pressure on markets with more exposure to hi-tech shares was more intense, with Korea’s KOSPI tumbling more than 4 per cent and Taiwan down 2.7 per cent.
Several global industry heavyweights such as Dell , Hewlett-Packard and LG Electronics have cut sales forecasts this week as the outlook for corporate, government and consumer tech spending dims.
A drop in factory activity in the U.S. Mid-Atlantic region to the lowest level since March 2009 stunned investors, as the data from the Philadelphia Federal Reserve Bank is viewed as a forward-looking indicator of national manufacturing.
“Investors have been spooked by these data. They are now focusing on next week’s data such as U.S. GDP,” said Yumi Nishimura, a senior market analyst at Daiwa Securities.
“Retail investors may buy defensive stocks on dips, but such buying may not have an impact on the overall index.”
An unexpected fall in existing U.S. home sales in July and a greater-than-expected rise in new claims for jobless benefits in the latest week also added to fears that the U.S. economic recovery could stall and possibly slide into recession.
In Europe, renewed fears that the euro zone debt crisis could infect the region’s financial system put pressure on short-term funding markets, forcing some European banks to pay higher rates for U.S. dollar loans and reviving memories of the dark days of late 2009 after the collapse of U.S. investment bank Lehman Brothers as funding dried up.
The U.S dollar was flat in Asia after earlier modest gains as investors piled into the safety of U.S. Treasuries despite falling yields.
U.S. 30-year Treasuries surged more than a full point in Asia, with traders saying the papers were getting an added boost from vague rumours about an emergency Fed meeting later on Friday.
U.S crude oil futures fell almost 2 per cent over fears energy demand will be hit by slower economic growth.