Asian stock markets follow America off the cliff

TOKYO — The historic carnage on Wall Street reverberated across Asia today, with stock markets in the region plunging after U.S. lawmakers rejected a $700 billion bank rescue plan aimed at stabilizing the U.S. financial system.

All major Asian stock markets in the region tumbled across the board, succumbing to heightened fears of a broader global financial crisis.

Japan's benchmark Nikkei 225 index nose-dived more than 544 points, or 4.6 percent, to 11,199.07, with popular stocks like Sony Corp. down 6.8 percent and Toyota Motor Corp. down 4.6 percent.

In Hong Kong, the Hang Seng index sank 3.6 percent. Markets in Australia, South Korea and the Philippines were also down sharply.

Japanese Prime Minsiter Taro Aso urged the country's financial officials to closely monitor the situation and take appropriate measures to protect the world's No. 2 economy, according to Kyodo News agency.

"We have to respond appropriately in order not to affect the Japanese economy and to prevent the financial system from falling apart," Aso was quoted as saying.

Japan's banks have relatively little exposure to the bad mortgages at the core of the global credit crisis, but investors are worried that a slowdown in the U.S. and global economy will hurt demand for exports.

Traders were stunned by the U.S. House of Representatives' rejection Monday of a $700 billion emergency bailout package that would have allowed the government to buy bad mortgages and other sour assets held by troubled banks and other financial institutions. With elections in November, many lawmakers were unwilling to take the political risk of supporting a measure that many American voters see as an undeserved bailout for rich, reckless investment bankers.

The Dow Jones industrial average plunged 777 points Monday, its biggest ever single-day drop, or nearly 7 percent, to 10,365.45, its lowest close in nearly three years.

"This is a bad development," Australian Prime Minister Kevin Rudd told reporters in the capital, Canberra. He urged U.S. lawmakers to urgently return to negotiations to come up with a deal that will prevent further infection of world markets.

Rudd said Australia's banking system was better regulated than the U.S. system and was better prepared for financial shocks, but that the failure to pass the package was another worrying sign in already tough times.

"The attitude that we will adopt, and I believe other friends and allies of the United States will adopt, is to urge the United States Congress to pass this or a similar measure when it is re-presented to the Congress later this week," he said.

Australia's benchmark S&P/ASX-200 index fell more than 5.3 percent within half an hour of the opening, but trimmed some losses as trading progressed. By afternoon trading, it was down 3.7 percent.

The key index in Taiwan's stock market, closed Monday for a typhoon, fell as much as 6.1 percent, even though Vice Premier Paul Chiu urged investors to have confidence in the island's export-driven economy and its financial markets.

The chaos also sapped the dollar overnight. The greenback was trading at 104.14 yen this morning in Asia from above 106 yen a day earlier, adding further pressure on major exporters.