Asian stocks nose-dived today as the first-ever downgrade of the U.S. government’s credit rating jolted the global financial system, reinforcing fears that the world economy is weakening.
Oil prices extended recent sharp losses, trading below $84 a barrel on expectations that weaker global growth will crimp demand for crude. The dollar was lower against the yen and the euro.
Among the major Asian markets, Hong Kong’s Hang Seng tumbled 3.9 percent to 20,128.20 and South Korea’s Kospi was down 4 percent to 1,814.100 after briefly diving nearly 7 percent. Japan’s Nikkei 225 stock average dropped 2.2 percent to 9,094.13.
Futures pointed to losses on Wall Street when it opens today. Dow futures were off 265 points, or 2.3 percent, at 11,138 and broader S&P 500 futures shed 30 points, or 2.5 percent, to 1,167.80.
“It’s not Armaggedon, but it feels like it,” said Hong Kong-based analyst Francis Lun, adding that he foresees the territory’s Hang Seng index to sink below 19,000 — a decline of a further 5 percent — before making any kind of comeback.
Standard & Poor’s downgrade of the U.S. sovereign credit rating to AA+ from the top-notch AAA, announced late Friday, was yet another blow to confidence in the struggling U.S. economy. It adds to growing fears that the world’s No. 1 economy may be headed back into recession.
David Cohen of Action Economics in Singapore said the downgrade Friday did not come as a surprise, given the warnings issued by the agency weeks in advance — but that it may serve as a wake-up call for leaders to take action.
“As long as people can calm down quickly enough, it need not become another global financial crisis,” Cohen said.
Singapore’s benchmark dived 4.9 percent, Taiwan’s market slid 3.6 percent and China’s Shanghai Composite shed 3.8 percent.