Asia extends equity malaise as meltdown fretted

Tokyo shares eked out a slight gain by the close as public pensions propped up the market. The benchmark Nikkei average rose 26.57 points, or 0.20 per cent, to end at 13,223.69. Nikkei December futures rose a modest 110 points to 13,260.

But traders said the price rises were tempting other investors to sell and doubted the efficacy of the buying. "It sort of dribbledin through the futures," said Masayuk Nishina, a trader at New Japan Securities. "But after the G7 meeting this weekend, the bears will be coming back."

The group of seven industrial nations meet in Washington over the weekend and will undoubtedly discuss the world’s financial crisis. But few traders say government actions will stop the global equity rout that has levelled markets in Asia, Europe and North America.

Meanwhile, concern over the outlook for the global economy weighed heavily again on markets on Friday, with European bourses sinking to 1997 levels and safe haven government bonds soaring to fresh record highs. The hard-pressed banking sector — in the front line as turmoil sweeps through markets worldwide — was hit hard again.

Shares in Dutch bank ING fell over 12 per cent in Amsterdam in reaction to Thursday night’s axing of 1,200 staff, while UBS stock slipped on news of top-level resignations after last week’s huge hedge fund-related losses.

"I feel ill when I look at these prices. InJuly you had to pay 160 marks for Deutsche Bank shares, now they cost 80 marks," one Frankfurt dealer said. "We need private investors to come back in."

Frankfurt bourse trading was dominated by a sharp fall in industrial group Daimler-Benz AG. Its shares fell over 11 per cent after Standard & Poor’s said it would not put Daimler Chrysler — its future merger with US car maker Chrysler — into its S&P 500 Index of leading US stocks.

London’s leading FTSE 100 index slumped to its lowest level since mid-November amid a general European share selloff. Milan was left as one of the few major European bourses still above its end-1997 closing level as blue-chip indices across the board lost a further three to five per cent in value, with selling in Athens sending the index down around seven per cent.

The drop followed two previous days of sharp falls, a 2.7 per cent decline on the Dow Jones Industrial Average overnight and falls of between seven and nine per cent on Latin American bourses.

A slightlypositive close on the Nikkei in Tokyo, up 0.2 per cent at 13,223, was not enough to calm nerves in Europe. Investors were still worried that a rapidly spreading credit crisis could trigger more corporate bankruptcies. Japan’s August unemployment rate reached a record high of 4.34 per cent.

Japan’s finance minister Kiichi Miyazawa said he wanted early implementation of planned controls on short-selling of stocks. Some hopes were pinned on positive news emerging from the weekend meeting of the Group of Seven industrial nations in Washington.

"We’re hearing comments already that industrialised countries should lower interest rates, cut taxes, to prevent a worldwide depression. That’s what the market’s counting on — it’s hoping for a strong signal," one equity strategist in Paris said. Others doubted that government actions would stop the global equity rout that has levelled global markets. A raft of US jobs and unemployment data due at 1230 GMT might give some hints for the future direction of US interestrates, said traders. The dollar hit fresh 19-month lows against the mark and 20-month lows against the Swiss franc under pressure from the further drop in US stocks and ongoing worries over the US economy’s vulnerability to global market turmoil.