Asian markets were mixed Friday as Japanese stocks fell despite the first rate cut in seven years while shares in India soared to catch up with a previous day's global market rally after a holiday there. European markets opened lower.
Investors were also digesting data overnight that confirmed the U.S. economy -- a major export market -- had contracted in the third quarter.
Tokyo's Nikkei 225 index sank 5% to 8,576.98 amid persistent worries about earnings. Investor sold shares after the previous day's 10% surge and ahead of a three-day weekend in Japan. They didn't react much to the Bank of Japan's rate cut, which was widely expected, even if it was a bit less than the typical quarter-point move.
South Korea's market extended the previous session's 12% rally with the Korea Composite Stock Price Index gaining 2.6% to 1,113.06. Australia's key index climbed out of negative territory to close 0.4% higher.
"Clients are a little more willing to re-enter the markets as the sense of panic has subsided a bit and valuations have been hammered to ridiculous levels," said Andrew Yates, vice president of foreign institutional sales at Asia Plus Securities in Bangkok.
"Obviously further volatility is likely but funds are picking up stocks at cheap levels for end of month rebalancing of portfolios," he said.
Hong Kong's Hang Seng slid 2.5% to 13,968.67 after vaulting 12.8% Thursday. Smaller Asian markets such as the Philippines and Taiwan both rose 4% or more, while Jakarta's main index shot up 7%.
In India, the benchmark Sensex index surged nearly 7% as traders caught up with Thursday's rally in Asian markets, when investors cheered a U.S. Federal Reserve rate cut and further central bank steps to boost dollar liquidity in emerging markets.
Early Friday in New York, U.S. stock index futures were about 2% lower, suggesting Wall Street would decline a day after the Dow Jones industrial average rose 189.73, or 2.11%, to 9,180.69. The S&P 500 index rose 2.6% to 954.09.
In Europe, markets opened lower, with Britain's FTSE 100 index down 1.9% and Germany's DAX down 1.2%.
Japan's rate cut comes as nations around the world seek to cushion their economies from the unfolding financial crisis. On Wednesday, the U.S. Federal Reserve slashed its key rate by half a percentage point to 1%, a level seen only once before in the last half century. Earlier this week, South Korea's central bank lowered rates by three-quarters of a point -- its biggest cut ever -- to 4.25%. China, Hong Kong and Taiwan also reduced rates this week.
The Bank of Japan's policy board was split 4-4, so Gov. Masaaki Shirakawa, who has the final say in the event of a tie, voted in favor of the cut.
The central bank warned that "adjustments in the world economy stemming from financial crises in the United States and Europe have further increased in severity."
In Tokyo, Honda Motor Co. fell 13%, Mitsubishi UFJ Finance sank 5.4% and Sony Corp. dipped 2.2%.
U.S. data overnight confirmed the world's largest economy shrank in the July-September quarter by an annual pace of 0.3%, marking the worst showing since it contracted at a 1.4% pace in the third quarter of 2001.
"The U.S. economy obviously contracted a lot more than the data says and it is likely to be revised lower. There are clear signs the contraction accelerated from September onward so the fourth quarter will also be weak," said Yates.
Oil fell below $64 a barrel in Asian trade with light, sweet crude for December delivery down $2.59 to $63.37 a barrel in electronic trading on the New York Mercantile Exchange by Friday afternoon in Singapore.
In currencies, the dollar fell to 97 yen from 98.68 yen, while the euro dipped to $1.2766 from $1.2875 late Thursday in New York.
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