TOKYO — Stocks dropped worldwide Monday as investors fretted about the dollar's continuing fall and questioned whether the Federal Reserve's cut in lending rates and the buyout of Wall Street brokerage Bear Stearns Cos. would avert a global financial calamity.
The dollar continued its slide when Asian markets opened Tuesday, falling below 97 Japanese yen in early trading as speculators anticipated another cut in the Fed's primary lending rate. On Monday, the dollar had nose-dived as far as 95.72, its lowest level since 1995, and closed at 98.04.
But the yen's sudden climb against the dollar has thrown profit projections awry for Japan's export-dependent economy, the second largest in the world. That sent stock values tumbling on Asian markets Monday. The Nikkei 225 Index was down 3.7%; it is down 23% since the beginning of the year.
Many global markets matched Japan's drop. Hong Kong's Hang Seng index fell 5.2%, and the CSI 300 index that tracks stocks in the Shanghai and Shenzhen exchanges fell 4.6%. European markets were also down: London's FTSE-100 was down 3.8%; Frankfurt's DAX fell 4.2% and Paris shares, on the CAC-40, were down 3.5%.
Asian investors interpreted the Fed's actions as further evidence of the depth of the U.S. economic retreat and global credit problems.
"Now Japanese investors completely lost confidence. They're more like jellyfish, just floating around," said Atsuo Mihara, an independent economist in Tokyo.
One Tokyo trader said he hadn't seen such turmoil in Japan's markets since 1997's Asian financial crisis. The fire-sale price of Bear Stearns was spooking the markets, he said. "If it's discounted extremely like this, it's like the end of the world."
For Japan, a higher yen takes a chunk out of profit for companies such as Sony Corp. and Toyota Motor Corp. that sell heavily to U.S. consumers. Most Japanese firms had issued profit forecasts based on a weaker yen, and the currency's rise has led several to warn of sharply lower results. Sony has said it loses $62 million in operating profit for every 1 yen gain against the dollar. The company's shares were off 5.7% on Monday.
Japan's worries were compounded by a political deadlock over a new governor for its central bank. Toshihiko Fukui's term expires Wednesday, and the main opposition party that controls Japan's upper house has blocked the government's proposed replacement on the principle that the next Bank of Japan governor must be free from political interference.
