Asian Markets Down Sharply, Commodities Down, Treasuries Up, and Gold up $20 as U.S. Markets Wait and See What the Stimulus Plan Will Do

Overseas markets worried about many issues

LONDON – Asian stock markets fell sharply Tuesday, with benchmarks in Hong Kong and South Korea down about 4 percent, as renewed financial fears sent banks across the region tumbling. European shares slid in early trade.

Every major Asian market retreated with the previous day’s news that Japan’s recession deepened amid the global economic downturn still weighing on investors. Crude oil prices fell below $37 a barrel, though the dollar strengthened against the yen and the euro.

Banks and insurers were in the spotlight amid concerns there was more pain ahead for the global financial industry.

In Europe, speculation had mounted overnight that Britain’s Lloyds Banking Group might be nationalized after the firm Friday reported larger-than-expected losses at recently acquired Halifax-Bank of Scotland. Adding to worries, Moody’s rating agency said banks with exposure in hard-hit Eastern Europe could see their ratings pressured.

From Bloomberg here are the issues

Feb. 17 (Bloomberg) — Stocks in Europe and Asia dropped and U.S. futures slumped on concern banks may face rating downgrades and further losses as the recession deepens. Gold climbed to a seven-month high, while Treasuries gained.

Swedbank AB and UniCredit SpA declined more than 4 percent and the euro fell to a 10-week low after Moody’s Investors Service said it may downgrade banks with units in eastern Europe. Woori Finance Holdings Co., which yesterday applied for state funding, sank 6.8 percent as the cost for South Korean banks to borrow dollars rose to a record. Daimler AG slid 4.1 percent after the maker of Mercedes-Benz trucks and cars posted earnings that missed analysts’ estimates.

“Market participants continue to be hit by a wave of disappointing corporate results and weakening economic data,” said Henk Potts, a London-based fund manager at Barclays Stockbrokers, which has about $45 billion under management. The fallout from the financial crisis “is filtering through to more and more economies.”

The MSCI World Index decreased 1.3 percent to 819.95 at 12:31 p.m. in London, extending its 2009 retreat to 11 percent. The gauge of 23 developed markets has dropped for six straight days as companies from Electricite de France SA to Diageo Plc posted disappointing results and U.S. Treasury Secretary Timothy Geithner failed to convince investors his bank rescue will work.

The MSCI Emerging Markets Index declined 3.5 percent, the biggest slide since November. Poland’s WIG20 Index slipped for a fifth day, losing 3.7 percent, while the Czech Republic’s PX Index tumbled 7 percent, the steepest drop since October.

Nakagawa Resigns

Europe’s Dow Jones Stoxx 600 Index declined 1.9 percent as Givaudan SA and Yara International ASA fell. Austria’s ATX Index slid 5 percent after Moody’s said the country’s banking system is the “most exposed” to the deteriorating economies in east and central Europe.

The MSCI Asia Pacific Index dropped 2.7 percent. In Japan, where Finance Minister Shoichi Nakagawa said he will resign amid accusations he was drunk at a Group of Seven press conference, the Nikkei 225 Stock Average lost 1.4 percent.

Futures on the Standard & Poor’s 500 Index decreased 2.1 percent. U.S. markets were closed yesterday for Presidents’ Day.