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Asian stocks slump as US rating is cut

By Wen Sheng (People's Daily Online)

10:12, August 08, 2011

Asian stock markets slumped on Monday after the Standard and Poor’s historically downgraded U.S. sovereign debts over the weekend.

It remains to be seen whether the credit reduction will cause another considerable loss in Wall Street’s stock indexes.

Oil prices extended losses, trading below US$85 a barrel on expectations that slowing global economic growth will crimp demand for crude.

China’s Shanghai composite index lost more than 3.5 percent Monday morning. Japan's Nikkei 225 stock average was down 1.3 percent at 9,178.30 and Seoul's Kospi dropped 1.6 percent to 1,913.58. Hong Kong's Hang Seng tumbled 2.6 percent to 20,409 while Australia's S&P/ASX 200 pared its initial sell-off to be down 1 percent at 4,062.70.

Futures pointed to losses on Wall Street when it opens Monday. Dow futures were off 225 points, or 2 percent, at 11,177 and broader S&P 500 futures shed 23.6, or 2 percent, to 1,174.20.

Worries that the U.S. economy, the world's biggest, is heading back into recession have been compounded by signs that Europe's government debt crisis could worsen.

A flurry of weekend activity by global finance officials gave rise to hopes of coordinated action to prevent a market meltdown.

The G-7 industrial countries issued a joint statement late Sunday pledging increased cooperation to attack economic problems and saying they were committed to taking all necessary measures to support financial stability and growth.

The European Central Bank, meanwhile, said it will "actively implement" a bond-purchase program that could boost Spanish and Italian bonds and drive down interest yields that threaten those countries with financial disaster.

The Dow fell 5.8 percent last week amid dour U.S. economic news. It plunged 513 points on Thursday alone, the worst day for the Dow since the global financial crisis erupted in 2008.

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