Asian stocks sink on fresh fears of US recession

BANGKOK (AP) — Asian stock markets were sharply lower Friday amid signs of a possible U.S. recession and renewed worries over the health of Europe's banks.

Japan's Nikkei 225 index dropped 2.2 percent to 8,751.67 and Hong Kong's Hang Seng slid 2.7 percent to 19,482.74. South Korea's Kospi dived 4.3 percent to 1,780.82. Australia's benchmark S&P/ASX 200 was down 2.7 percent at 4,137.90.

Benchmarks in Singapore, Taiwan, mainland China and New Zealand also fell.

Financial markets have wrestled for several weeks with fears that a new recession in the U.S. is in the offing. The number of people filing claims for unemployment benefits rose to 408,000 last week, an increase of 9,000 from the week before. Inflation is on the march higher while housing sales remained in the doldrums.

The raft of bad economic news sparked a sell-off on Wall Street on Thursday. The Dow Jones industrial average fell 3.7 percent to 10,990.58. The Standard & Poor's 500 index fell 4.5 percent to 1,140.65. The Nasdaq composite fell 5.2 percent to 2,380.43.

Asian bank stocks followed their European counterparts lower. Bank of China Ltd. slid 3.5 percent, while the Industrial and Commercial Bank of China, the world's biggest bank by market value, lost 2.2 percent. Commonwealth Bank of Australia Ltd., the nation's largest lender, fell 2.6 percent.

Energy shares were hammered amid fears that demand would dry up if the world economy throttles back. PetroChina Ltd., the publicly traded unit of China's biggest oil and gas company, lost 3.7 percent. CNOOC, China National Offshore Oil Corp., fell 4.1 percent. Energy Resources of Australia was 4 percent down.

Worries about Europe's spiraling debt crisis also hung over the market. A default by any country would hurt the European banks that hold its bonds, plus American banks that have lent to their European counterparts.

The leaders of France and Germany held emergency talks in Paris on Tuesday but failed to take immediate financial measures seen by many investors as the only way to halt the debt crisis, which has dragged on for nearly two years and resulted in a string of sovereign bailouts worth hundreds of billions of euros.

Benchmark crude for September delivery was down $1.57 to $80.82 a barrel in electronic trading on the New York Mercantile Exchange. The contract dived $5.20 to settle at $82.38 per barrel on Thursday.

In currencies, the euro rose to $1.4326 from $1.4319 late Thursday in New York. The dollar was slightly down to 76.47 yen from 76.54 yen.

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