Shares plummet on Asian markets

Share prices in Asia have followed the sharp downward trend set by US and European markets, amid growing fears of a global recession.

Japan's Nikkei index fell by about 10% in early trading while shares in Australia, South Korea and Singapore dropped by at least 5%.

Hong Kong opened nearly 7% down and Shanghai by nearly 4%.

New York's Dow Jones index saw its worst one-day fall on Wednesday since October 1987, closing almost 8% down.

There were also big falls in London and other European markets on Wednesday.

Ben Bernanke, the chairman of the Federal Reserve, warned that the US economy now faced a "significant threat" from the credit crisis.

'Real economy' impact

Signs of optimism seen earlier this week when markets recovered some of the lost ground have been all but wiped out, the BBC's John Sudworth reports from Tokyo.

The Nikkei average had dropped 10.33% by 0944 (0044 GMT) in Tokyo. It rose slightly afterwards.

"There's a certain degree of panic selling in Tokyo but the sentiment's different from last week," Takashi Ushio, head of the investment strategy division at Marusan Securities, was quoted as saying by Reuters news agency.

"Last week people were panicking over the financial system, nobody really knew what would happen. But now it's the real economy."

Yutaka Miura, senior strategist at Shinko Securities Co Ltd, said investors were particularly unnerved by a 1.2% fall in the value of US retail sales between August and September.

"It really confirmed a severe slowdown in the US economy," he told The Associated Press news agency.

Slowing economy

Many investors are now convinced that the US economy, if not already in a recession, is moving towards one.

A Federal Reserve report showed economic activity had weakened across the country.

In a speech in New York, Mr Bernanke said the US had avoided making the mistakes that helped plunge the country into the 1930s Great Depression.

He pledged that the Fed would continue to fight the credit crisis. But he warned it would take time for the country's economic health to mend.

"The turmoil in financial markets and the funding pressures on financial firms pose a significant threat to economic growth," he said.

"The last decade has shown that bursting bubbles can be an extraordinarily dangerous and costly phenomenon for the US economy."

The leaders of the G8 major industrialised nations agreed on Wednesday to hold a summit with other states to discuss global financial reform.

In Brussels, EU leaders rallied behind a plan to aid the bloc's banking sector.