Asian stocks slump on oil price, US jobless surge


Posted at Jun 09 2008 12:56 PM | Updated as of Jun 09 2008 08:56 PM

Agence France Presse

TOKYO - Asian stocks tumbled Monday after a breathtaking surge in oil prices and shock jump in US unemployment sent Wall Street spinning and fanned fears of sharply slower economic growth.

Japanese shares slid just over two percent after a dizzying three-percent plunge in the US Friday, when oil prices rocketed the most ever in a single day to close nearly 11 dollars up at record levels around 139 dollars per barrel.

Taiwan, Singapore and South Korea were also around two percent down as morning trading drew to a close in Asia, where investors were still coming to terms with Friday's half-point jump in US unemployment to 5.5 percent for May.

"Asian markets are certainly in for a heavy pounding over the next few weeks," Andy Xie, a former Morgan Stanley economist now working independently from Shanghai, told AFP.

Investors worry that sky-high crude oil costs will bleed money from consumers, squeeze business profits and force central banks to raise borrowing costs in a bid to tame inflation, which has taken off in many countries.

That could hit economic growth even as the world economy struggles to recover from the default crisis among subprime -- or riskier -- US mortgages, which according to the IMF threatens losses of nearly one trillion dollars.

"A lot of people were hopeful that the US could avoid recession. What happened Friday dashed those hopes, which were pretty far-fetched, since a huge credit bubble has just burst," Xie said.

Elsewhere, Indonesia was around one percent down Monday and Malaysia fell 1.5 percent. Both nations have sharply raised fuel prices recently as multi-billion-dollar official energy subsidies become unaffordable across Asia.

Oil prices eased back Monday but were still at around 137 dollars in Asian trade as calls mounted for quick action to tame them.

On Sunday, eleven nations that guzzle nearly two-thirds of the world's energy called at a G8 meeting for an urgent hike in global oil production as host Japan warned the world could plunge into recession.

Meanwhile, Lehman Brothers said in a statement Friday that a "cost-push inflation shock" had become its top for worry for Asia, which is also battling soaring food prices.

The investment bank said the longer the shock lasted, the more it would hurt economic growth, although many experts have yet to dramatically scale back predictions of reasonably robust Asian expansion this year.

However, there are lingering fears that Asia remains export-dependent and could suffer as the US economic slowdown curbs international shipments, including from China.

"One camp thinks the slowing US economy will hit China's export engine, while another says China can weather the impact because of growing domestic consumption," said Peter Alexander, the founder of consultancy Z-Ben Advisors.

"We're somewhere in the middle -- we expect a slowdown but not a dramatic slide," the China-based expert told AFP, adding that, looking at the long term, Chinese shares were oversold following their tumble since last year.

The Chinese market was shut Monday for a holiday, along with Hong Kong, Australia and the Philippines. Investors were anxious about how those markets would perform when they reopen Tuesday.