Bears in high spirits in Asia

Markets thumped around 3% as dollar hits near four-year highs, North-South Korea tensions worsen

Asian markets were hit hard by a number of forces from Europe as well as Asia today. The Eurozone debt worries continued to make waves while markets were also focusing on the escalating tensions between North and South Korea. South Korea's President Lee Myung Bak said yesterday the country would push for a United Nations censure against North Korea for the March 26 sinking of a naval ship. Media reports further stated today that the North Korean premier instructed his military to be prepared after South Korea alleged that its neighbor was responsible for the sinking of its warship.

This bought the geopolitical worries out in the open and US dollar rose directly in response to this development- surging near its four-year highs against the Euro yet again. Investors dumped stocks and other risky assets and most of the Asian indices dropped around 3%, continuing their recent declines. DOW futures also fell very sharply, keeping the selling pressure on the regional equities throughout the day.

The overnight cues were also negative and the early moves in Asia clearly showed that the equities would be headed for collapse. Four Spanish savings banks submitted plans to combine to form the nation's fifth-largest financial group with more than 135 billion euros ($167 billion) in assets. On Saturday, the Bank of Spain seized CajaSur, a savings bank in Cordoba owned by the Catholic Church, after the lender's board refused a merger plan four days ago. International Monetary Fund has warned about the deteriorating fiscal conditions in Spain.

The Japanese stocks plunged on fresh concerns about war in the neighborhood after North Korean premier is understood to have instructed his military to be in prepared state for possible attack on South Korea. Sharp decline in other major markets in the region, dragged down by financial and commodity stocks, impacted the market sentiment negatively and dragged the benchmark Nikkei to a new six-month low.

The benchmark Nikkei 225 Index fell 298.51 points, or 3.1%, to 9460- its lowest finish since Nov. 30 last year, while the broader Topix index of all First Section issues was down 20.19 points, or 2.3%, to 860.

The Australian market also followed the regional peers lower, reversing yesterday's gains and ended sharply weaker. The sharp drop in Australian Dollar against the US Dollar as well as drop in commodity prices, including crude oil prices, which shed around 3 dollars in the electronic moves pushed down the stocks with no respite coming in whatsoever. The benchmark S&P/ASX200 Index ended down 130.10 points, or 2.96% and closed at 4,265, while the All-Ordinaries Index ended at 4,286, shedding 126.50 points, or 2.87%.

Chinese markets dropped fell for the first time in three days on speculation the government will step up measures to avert asset bubbles even as Europe's debt crisis threatens to halt the global recovery. The Shanghai Composite Index lost out 50.79, or 1.9 percent, to close at 2,622.63. The CSI 300 Index declined 2.1 percent to 2,813.94. Following Chinese stocks, Hong Kong's Hang Seng Index also fell 3.5% for its weakest close since July.

In Mumbai, the key benchmark indices tumbled to their lowest level in more than three months as world stocks slumped amid tensions in Korea as well as anxiety over global debt levels and sovereign default fears. The BSE 30-share Sensex was provisionally down 451.58 points or 2.74%, up close to 60 points from the day's low and off close to 425 points from the day's high. The BSE Sensex regained the psychological 16,000 mark soon after falling below that mark in late trade.

In other markets, Straits Times in Singapore shed 2.67%, TSEC in Taiwan slumped 3.23%, New Zealand's NZX 50 dropped 1.9% and Philippine stocks pared 2.8%.

Yesterday, in the U.S., stocks saw substantial losses to open the week on Monday, even as some positive data came out on housing. The major averages all closed firmly in negative territory, with the Dow falling to a three and a half month closing low. The Dow fell by 131.73 points or 1.3% to 10,062, the Nasdaq slid by 15.49 points or 0.7% to 2,213 and the S&P 500 slipped by 14.04 points or 1.3% to 1,074.

The DOW futures have consistently added to losses today, currently indicating that the DOW could drop by a massive 224 points at the open today. Crude oil slumped under $68 per barrel and currently trades at $67.86, down $2.35 while Gold is currently a little uncertain, just stalling around $1190 per ounce. Euro is losing out thick and fast, down 1.50% on the day and currently hovers at 1.2198 against the US dollar.