US tremors jolt Europe and Asia

“There’s something approaching panic in the market,” Holger Schmieding, the chief European economist at Bank of America in London, said. “There’s been a reassessment in the market of the US economic outlook, with most people now thinking that there will be a recession,” and investors are starting to reconsider the idea that the rest of the world “will remain aloof from US problems.”

The selling began in Sydney, with Australian stocks falling nearly 3 per cent for an 11th consecutive decline. Major markets in Asia followed suit, with the benchmark Nikkei 225-stock average in Tokyo falling 3.9 per cent, the Hang Seng in Hong Kong falling 5.5 per cent and the benchmark mainland Chinese index falling more than 5 per cent.

European shares were on track for their biggest decline in more than four and a half years as US recession fears rattled investors. At the close, Dow Jones Euro Stoxx 50 was down 7.3 per cent. The CAC 40 index in Paris was down 6.8 per cent, having fallen more than 7 per cent at one point. The Dax 30 in Frankfurt was down 7.1 per cent, and the FTSE 100 in London was down 5.5 per cent.

US markets are closed on Monday in observance of Martin Luther King’s birthday. But trading in stock index futures on Monday, while light and not always a reliable indicator, pointed to a substantial decline on Wall Street. Futures in the Dow Jones industrial average were down 520 points, or more than 4 per cent.

Stocks received no lift on Friday despite an announcement that the Bush administration would seek a stimulus package of as much as $145 billion.

Market participants said that meant investors were convinced that an American recession is looming, and economists and strategists said the effect would span the globe. No matter how many bridges, roads and power plants China builds, or new cars India sells, a downturn in the US will batter Asian economies, they said.

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