Asian stock markets dropped Wednesday, with Japan's benchmark losing 2 percent, as concern that rising bank losses will cripple the world economy overshadowed the inauguration of U.S. President Barack Obama. European markets tracked Asia lower.
The downward lurch followed Wall Street, where investors returning from a holiday reacted with alarm to a rash of negative news about Western banks like Royal Bank of Scotland and sent key stock measures tumbling by more than 4 percent.
Sentiment across Asia and Europe was dour even as Obama assumed power Tuesday vowing to "begin the work of remaking America." Hopes faded that his administration can bring about a quick recovery in the world's largest economy through a massive stimulus package planned later this year.
"While it was a great day to hope, and fun to watch a part of history, investors are very much in tune to the reality that there is not a lot this new president can do to help Asia, or the world, let alone the United States, in the very near term," said Kirby Daley, senior strategist at Newedge Group in Hong Kong.
In the latest signs of strain on Asian economies amid the global slump, Singapore slashed its 2009 growth forecast for a second time this month, saying the economy could shrink as much as 5 percent. The Southeast Asian city-state, already in recession along with Japan and Hong Kong, is reeling from plunging demand for its exports from industrial countries and elsewhere.
In Japan, the Nikkei 225 stock average dropped 164.15 points, or 2 percent, to 7,901.64, while Hong Kong's Hang Seng Index shed 381.19 points, or 2.9 percent, to 12,578.58.
Benchmarks in Singapore, South Korea and India retreated about 2 percent or more, and Australia's stock measure lost 1 percent. Shanghai's main stock gauge was off around 0.5 percent, while Taiwan's stock measure inched modestly higher.
As trading opened in Europe, Britain's FTSE lost 0.1 percent, Germany's DAX shed 1.1 percent and France's CAC-40 was off 1.4 percent.
Overnight in New York, Wall Street pitched sharply lower as Obama took office, with the Dow Jones industrial average plummeting 332.13, or 4 percent, to 7,949.09, its worst ever showing for an Inauguration Day.
Broader stock indicators also fell sharply, as the Standard & Poor's 500 index fell 44.90, or 5.3 percent, to 805.22.
Wall Street futures suggested U.S. markets would recover in Wednesday trade. Dow futures were up 60 points, or 0.8 percent, at 8,005 and S&P500 futures were up 5.3 points, or 0.6 percent, at 811.10.
As in the U.S., where banking stocks like Citigroup and Bank of America collapsed by double digit percentages, Asian trade saw sharp selling in the financial sector as investors feared governments would again have to bail out Western firms with too much debt and not enough capital.
In Japan, heavyweight lender Sumitomo Mitsui Financial Group Inc. fell 5.3 percent. London-based lender HSBC Holdings PLC continued to get pummeled, shedding another 3.9 percent in Hong Kong trade.
In oil, light, sweet crude for March delivery fell 47 cents to $40.37 in Asian trade. The contract fell $1.53 to settle at $40.68 overnight, with the February contract expiring Tuesday.
In currencies, the dollar traded down at 89.71 yen, compared to 89.87 yen, while the euro rose to $1.2899 from $1.2876 late Tuesday.
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