Japanese index sinks to lowest close since 2003; Sony, other firms also reel
LONDON - Britain's economy shrank, China said the outlook was grim and companies from Japan to France were punished on Friday as a downturn born of the worst financial crisis in 80 years took root.
European shares shed 7 percent after stocks in Japan had dropped almost 10 percent to their lowest point in 5 1/2 years.
"The global financial crisis has been constantly spreading and worsening, creating a severe shock to global economic growth," Chinese Premier Wen Jiabao told an Asia-Europe Meeting of 27 European Union member states and 16 Asian nations.
The dollar plunged below 95 Japanese yen, a 13-year low, as traders reacted to dismal U.S. jobs data that spurred speculation the Federal Reserve might cut interest rates.
In Washington, the Treasury Department and bank regulators plan to announce as soon as this weekend the next batch of banks receiving capital injections as part of its bank bailout package, a source familiar with the Treasury's thinking told Reuters.
A range of corporate giants reeled too, not just the banks who were hit first and hardest by a financial crisis that began with a U.S. housing market collapse and now threatens recession across much of the globe.
Sony's shares tumbled 13 percent to a 13-year low after it halved its profit forecast because the fallout of the financial crisis hit demand for its cameras and flat TVs.
Sony's earnings revision "was yet another indicator that the global economy is really slowing," said Yutaka Miura, senior strategist at Shinko Securities in Tokyo. "Investors remain worried over growing uncertainty about the state of the global economy."
French carmaker PSA Peugeot Citroen cut its full-year operating margin target on Friday and said it planned to make "massive" production cuts in the fourth quarter after posting a 5.2 percent fall in third quarter sales.
And world number two truck maker Volvo posted a surprise fall in third-quarter pretax earnings.
Meanwhile, official data showed Friday that Britain's economy shrunk 0.5 percent in the third quarter, more sharply then forecast, after registering no growth in the second.
Bank of England policymaker Andrew Sentance said the risk of a severe U.K. recession had risen. "Hopefully we can avoid that sort of situation in the current circumstances, but the risks of that have increased," he told BBC Radio.
On Friday, Japan's Nikkei 225 stock average slid 9.6 percent to 7,649, its first close below 8,000 since May 2003. For the week, the Nikkei lost 12 percent.
The dollar fell as low as 94.75 yen, the lowest since August 1995. A strong yen erodes Japanese exporters' earnings.
"Dollar-selling seems unstoppable. Investors continue to dump the dollar due to ongoing worries over the slowing U.S. economy," said Ikkou Takahashi, currency dealer at Mizuho Bank.
South Korea's stock market also fell sharply as foreign investors fled the country's stock market and figures showed the economy there was slowing. The Kospi dropped 10.6 percent to 938.75, falling below the 1,000 mark for the first time in more than three years.
For the week, the Kospi has fallen 20.5 percent, its worst since records began to be kept in 1987. For the year, the index is down just over 50 percent, a sharp reversal of the bull market in Korean stocks.
European leaders want China, the world's fastest-growing major economy, to help shape global financial reforms.
"There was large agreement that such answers must be found internationally," German Chancellor Angela Merkel said after talks with Chinese President Hu Jintao in Beijing. "I think China will make its contribution to the stabilization of the world economy."
Hu had earlier said the outlook was "grim and complicated."
'Global crisis has come to Asia'
Earlier Friday, figures showed that South Korea's economic growth slowed to 3.9 percent in third quarter, the slowest rate in three years.
In Hong Kong, the Hang Seng fell 6.6 percent to 12,853. Markets in Thailand, Indonesia and the Philippines were also down sharply as investors bailed from emerging markets around the world to cut their exposure to risky assets and meet redemption needs at home. On Thursday, key indices in Russia, Brazil and Mexico also fell.
"Funds are pouring out of emerging markets," said Linus Yip, a strategist at First Shanghai Securities in Hong Kong. "A lot of money that flowed into the region during the last five years from the U.S. and Europe is being cashed out. The global crisis has come to Asia."
In Tokyo, dollar-selling intensified as traders reacted to bleak new numbers on the U.S. job market Thursday that showed unemployment claims rising even faster than expected, spurring speculation the Fed might cut rates to help shore up the sagging U.S. economy.
Sony said Thursday afternoon its net profit for the fiscal year through March 2009 would likely drop 59 percent from the previous year to 150 billion yen ($1.5 billion). Previously, it had expected to post 240 billion yen ($2.4 billion) in profit for the fiscal year.
Panasonic Corp. lost 12 percent and Toyota Motor Corp., shed 6.4 percent.
Overnight in New York, the Dow Jones industrial average rose 2 percent to 8,691.25, while the Standard & Poor's 500 index rose and the Nasdaq fell.
Leaders of the world's major industrial nations and other big economies will discuss the crisis at a special summit on Nov. 15 in the United States.