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TOKYO: Worries about the spluttering global economy kept investors on edge Friday, although efforts by governments to keep credit flowing helped to calm recent panic on world markets.
There were signs of a thaw in frozen credit markets following moves by world powers to pump billions of dollars into shaky markets and banks teetering on the brink of collapse to prevent a meltdown of the financial system.
But at the same time investors were increasingly worried about the risk of a severe global economic slowdown that could lead to rising unemployment, lower consumer spending and weaker corporate profits.
"Despite worldwide efforts to stabilise financial markets, fears the global economy is headed for recession continue to reverberate" around the world, noted NAB Capital economist David De Garis.
Japan's Nikkei index ended 2.78 per cent higher, clawing back some of the previous day's loss of more than 11 per cent, which was the biggest drop in two decades.
But other Asian markets were mixed. Sydney ended down 1.1 per cent and Seoul lost 2.7 per cent. Hong Kong was flat at midday while Shanghai rose 1.0 per cent.
"Market players remain cautious ahead of the weekend," said Toshihiko Matsuno, head of research at SMBC Friend Securities, noting that a raft of US and Japanese corporate earnings reports are looming on the horizon.
"We all know that companies are not doing well. What we don't know is how bad their reports could be," he said.
Among the latest efforts to try to ensure a continued flow of credit vital to the world economy, Malaysia issued a guarantee late Thursday for all bank deposits until December 2010.
South Korea's central bank said it would revise currency swap market regulations to help local banks ride out the ongoing global financial crisis.
The won has fallen some 40 per cent against the dollar this year.
Australian Prime Minister Kevin Rudd meanwhile called for an overhaul of the global financial regulatory framework, including curbs on executive pay.
Overnight on Wall Street, the Dow Jones Industrial Average jumped 401.35 points, or 4.68 per cent, a day after its steepest percentage drop since 1987.
Data showed US industrial production plunged 2.8 per cent in September, the steepest decline since 1974.
Oil prices fell further, with New York crude settling below US$70 dollars a barrel for the first time since August 2007, providing some comfort to investors worried about the outlook for the economy and corporate earnings.
But most people were reluctant to buy against such an uncertain outlook for the global economy and markets, which have been battered by a credit crunch that has shaken confidence in the global financial system.
"Investors tend to perceive the US financial system woes have become global. So, the Wall Street gains failed to boost sentiment," said an analyst in Taipei where stocks were down 2.28 percent at their lowest point in more than five years.
An emergency summit of the Group of Eight wealthy powers is expected in November to discuss the crisis.
French President Nicolas Sarkozy said Thursday he would press European calls for major reform of the financial system when he meets US President George W. Bush this weekend at Camp David, near Washington.
Switzerland meanwhile was forced to take emergency measures to prop up its key banking sector, pouring almost US$60 billion into the biggest bank UBS, one of the heaviest losers from the US high-risk subprime mortgage crisis.
- AFP/yb
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