Asian markets tumble as economic gloom deepens

Global markets suffered fresh turmoil Thursday, with Asian stocks plunging as a sharp drop in Japanese exports added to gloom about the outlook for the faltering global economy.

Japan said its exports fell at the fastest pace in almost seven years as Chinese demand cooled, pushing Asia's largest economy deeper into recession as the global economic slump curbs international trade flows.

Dealers' screens were red around Asia. Stocks dropped 6.9 percent in Tokyo, 6.7 percent in Seoul and 4.2 percent in Sydney, after Wall Street tumbled to its lowest level since March 2003.

"It's forced selling. The market's trying to find an absolute floor," said Bell Potter senior adviser Stuart Smith in Australia.

Fears of an implosion of the US car industry continued to weigh heavily on investors' minds as the "Big Three" begged for government aid to survive the worst financial crisis since the Great Depression in the 1930s.

"There is caution regarding a possible bailout of the Big Three. It has not taken a concrete shape yet and there are fears that the negotiations may fail," said Kazuhiro Takahashi at Daiwa Securities SMBC.

In Britain, the Society of Motor Manufacturers and Traders and the Retail Motor Industry Federation called on the government to shield the British automotive sector from a credit squeeze through loans and possible guarantees.

And Rolls-Royce , the British maker of airplane engines, said it planned to cut up to 2,000 jobs worldwide in 2009.

The US economy remained on the ropes as figures showed construction starts on new homes and housing building permits fell to record lows in October as the prolonged slump in the real-estate sector deepened.

Data from the world's two biggest economies -- Japan and the US -- "pointed to deep economic problems," said Dariusz Kowalczyk, chief investment strategist at CFC Seymour in Hong Kong.

"The US will not emerge from recession until at least the second quarter of 2009 and Japan the third quarter," he warned.

The Fed sharply cut its outlook for the world's biggest economy for 2009, saying it could grow as much as 1.1 percent or contract 0.2 percent.

Official data showed US consumer prices plunged a record 1.0 percent in October -- the steepest one-month decline in 61 years, led by oil prices plummeting from their July record highs.

"With economic growth and inflation pedalling backwards, deflation talk is deafening," said Jennifer Lee at BMO Capital Markets. "Tighten your seatbelts as fourth-quarter growth is going to be ugly."

A top Chinese official meanwhile warned the Asian giant was facing serious unemployment problems due to the global economic crisis.

"Currently, the employment situation is critical, and this impact (of the crisis) is still unfolding," said Yin Weimin, the social security minister.

China announced a package of measures aimed at absorbing job losses and staving off civil unrest, as well as tax cuts aimed at helping its textile industry through the global financial crisis.

The grim economic news and the prospects for weaker demand for energy pushed down oil prices. New York's main futures contract dropped 84 cents to 52.78 dollars a barrel in late Asian trade.

The International Monetary Fund meanwhile said its executive board approved a loan of 2.1 billion dollars for Iceland to help the country rebound from a dire financial crisis.

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