Asian stocks plunged today, with Japan's Nikkei down more than 10 per cent, while the yen and US Treasury debt prices rose, as panic set in after global efforts so far failed to unlock credit markets.
A synchronised cut in borrowing costs by central banks around the world this week was seen as too little, too late, and investors doubted a meeting of the Group of Seven rich nations later today could achieve much, with fears growing that the global economy is headed towards recession.
US government debt and the yen have become refuges from the worsening financial crisis that overnight knocked the US S&P 500 stocks index down 7.6 per cent to a 5-year low. But cash was ultimately king, with even Japanese government bonds being liquidated for funding.
Fears of a sharp slowdown in demand for raw materials from heavy consumers like China and the United States dragged oil prices down to a 12-month low below $83 a barrel.
"It's impossible to predict the bottom, and technical analysis is meaningless as panic and fear overwhelm the markets," said Jang Huh, managing director at Prudential Asset Management in Seoul.
The Nikkei share average was down 10.1 per cent, bringing the week's losses to more than 20 per cent.
Unlisted Yamato Life Insurance Co filed for bankruptcy protection because of market turmoil, shocking investors who had thought Asia's financial sector, especially Japan's, was relatively stable compared with Europe and the United States.
The MSCI index of Asia-Pacific stocks excluding Japan was down 7.7 per cent to its lowest since January 2005, and has fallen 21 per cent this week alone. The all-country world stocks index fell to the lowest since November 2003.
Hong Kong's Hang Seng index dropped 7 per cent to a near three-year low. The market value of companies listed on the index has lost almost half its value since the year began.
Singapore's Straits Times index fell more than 6.6 per cent, and data confirmed one of Asia's richest conomies was in a recession.
The Chicago Board Options Exchange Volatility index (VIX), seen as a gauge of investor fear, hit an all-time high of 64.92, as investors scrambled to buy increasingly expensive protection against erratic price action.
With global equity markets declining with brutal swiftness, investors have rushed to US Treasury debt despite weakness in recent days on expectations for a glut of new issuance.
The 10-year note rose 6/32 in price, taking its yield to 3.76 per cent from 3.78 per cent. Rates on one-month T-bills fell to just 0.046 per cent, from 0.080 yesterday and 1.55 per cent as recently as September 11th, as the very short end of the market continued to act as a source of funding with other avenues all but shut down.
Reuters