Asian stocks struggle amid recession worries

Investors were bracing for another tough week for markets as the worldwide financial crisis drags on, and the International Monetary Fund (IMF) moved to bail out Ukraine and Hungary which have suffered badly in the turmoil.

In Japan, Prime Minister Taro Aso announced fresh measures to support the ailing stock market including boosting a government fund to pump capital into banks if needed.

As policymakers continued their efforts to contain the turbulence, South Korea's central bank cut its key interest rate by 75 basis points, its largest reduction yet.

The fresh sell-off began in Japan, where the Nikkei briefly fell to a level last seen in 1982 before the economic bubble era.

The index later rebounded to show a gain of 0.4 percent by lunch on talk of possible intervention by the Japanese authorities to try to rein in the soaring yen.

Elsewhere Taipei lost 6.0 percent and Shanghai shed 2.3 percent. Sydney was down 1.35 by midday while Hong Kong opened 2.0 percent lower.

South Korea's KOSPI index was down 0.58 percent despite the rate cut.

US and European markets suffered heavy losses on Friday, with Wall Street's Dow Jones index ending down 3.59 percent.

‘Perhaps the most accurate statement of the day for equity markets is that we are now closer to the bottom than we were last week,’ Sonray Capital Markets chief economist Clifford Bennett told Dow Jones Newswires.

The Nikkei fell 12 percent last week, while Hong Kong's Hang Seng lost 13 percent.

The Nikkei has fallen some 50 percent this year and is 80 percent off its all-time high, reached in December 1989 before Japan's asset bubble burst and ushered in a decade of stagnant growth, recessions and deflation.

Hiroichi Nishi, a broker at Nikko Cordial, said investors were pinning hope on government measures to try to stabilise plunging markets while keeping a close eye on currency movements.

The yen hit a 13-year high against the dollar and a six-year peak against the euro last week, punishing exporters.

Japan's Finance Minister Shoichi Nakagawa voiced heightened concern about the surging yen, warning that ‘excessive’ and ‘disorderly’ currency movements were destabilising Asia's biggest economy.

‘I will continue to watch currency markets with great interest,’ he said.

The comments sparked fresh speculation that the Japanese authorities may intervene in the market for the first time since March 2004 to curb the yen's rapid ascent, which is taking a heavy toll on exporters.

The yen often rises at times of financial turmoil as dealers unwind risky bets funded with cheap Japanese credit.

Markets expect fresh steps by global authorities this week to try to stabilise shaky markets.

The US Federal Reserve is expected to cut interest rates Wednesday from the current level of 1.5 percent.

Investors are also waiting for Thursday's US gross domestic product figures for the third quarter, which are expected to show a contraction.

A slew of economic indiators and corporate results are also due this week in the United States, Europe and Japan, which analysts said are unlikely to give much cause for optimism.

‘If the fall in markets has its origins in the fear of an international recession, then the coming week will be very bad,’ said Carl Weinberg at High Frequency Economics in New York.

‘The economic calendar is full of indicators that will be uniformly atrocious.’