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TOKYO: Asian stocks stumbled in early trade as fears mounted of a collapse of the huge US automobile industry, a key pillar of the world's largest economy.
US Treasury Secretary Henry Paulson warned there was no immediate relief in sight for the American economy, but he ruled out dipping into a giant Wall Street bailout package to help the struggling "Big Three" automakers.
"The crisis in our financial system had already spilled over into our economy and hurt it. It will take a while to get lending going and repair our financial system, which is essential to an economic recovery," Paulson said.
The gloomy economic outlook weighed on Asian stock markets. Japan's Nikkei index lost 1.8 per cent while Korea's Kospi shed 2.9 per cent and Australia's S&P/ASX 200 declined 1.7 per cent.
"A strong sense of caution lingers," said Motoki Ichikawa, investment information chief at SMBC Friend Securities.
"The market lacks a clear direction," he said, adding investors were watching for additional economic stimulus measures in the United States as well as a possible rescue for the "Big Three", General Motors, Ford and Chrysler.
General Motors boss Rick Wagoner warned the US economy will face a "catastrophic collapse" if the government does not bail out the automotive industry, while Chrysler's chief said the firm could run out of cash without "immediate" help.
It's not just US car makers that are feeling the pain. Japan's Nissan Motor chief executive Carlos Ghosn warned the company was likely to make "zero" profits in the second half of the current fiscal year.
"We have to recognise 2009 will be one of the most challenging years for our industry and the whole economy in the last 50 years," he told the Wall Street Journal.
Worries about the US auto industry weighed on the dollar, which fell to 96.53 yen in Tokyo morning trade, down from 96.89 in New York late Tuesday.
"The auto industry is related to many other industries and the negative
mpact (of its possible collapse) on employment is unfathomable," said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp.
US stocks made modest gains Tuesday in another volatile day, with the Dow Jones Industrial Average ending up 1.83 per cent.
Equities markets in Europe suffered sharp losses, however, and oil prices fell in a market dominated by concerns over the effect of the slowing global economy on energy demand.
"Investor confidence has been decimated and all of us are looking for a catalyst, but it continues to be a struggle for many companies worldwide," Barry Lindsay, director of research at First NZ Capital, told Dow Jones Newswires.
"People have got it into their heads that the downturn is going to be deep, protracted and ugly really. They have got no confidence about earnings and can't seem to price shares."
- AFP/yb
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