(Agencies)
Updated: 2008-01-22 16:29

TOKYO - Global stock markets extended their shakeout into a second day Tuesday, plunging amid worries that a possible US recession will cause a worldwide economic slowdown.

A stock market trader gestures during trading at the New York Stock Exchange, January 18. [Agencies]

The dramatic declines in Asia and Europe were expected to spread to Wall Street, where stock index futures were already down sharply hours before the trading day began.

Japan's Nikkei 225 index, the benchmark for Asia's biggest bourse, was down 5.1 percent in afternoon trading after dropping 3.9 percent Monday.

Trading was halted in India when the Sensex index plummeted 9.75 percent within minutes of opening. Hong Kong's Hang Seng index dropped 8 percent by midday after diving 5.5 percent the day before.

"Unless we get some positive 'shock effects,' such as drastic measures from the US government, there is almost no hope for a recovery in stocks," said Koji Takeuchi, senior economist at Mizuho Research Institute in Tokyo.

Asian markets have fallen sharply since the start of the year: Japan's benchmark index has sunk nearly 17 percent, while the Hang Seng is down a stunning 22 percent.

Oil and gold prices also fell. Light, sweet crude for February delivery fell to $88.35 a barrel amid speculation that slower US growth will weaken demand. Spot gold, which usually benefits from market uncertainty, fell to a 2-week low of $860.90 per troy ounce.

US markets were closed Monday for a holiday commemorating civil rights leader Martin Luther King Jr. But Wall Street future prices were down sharply, portending a plunge when trading begins at 9:30 am Eastern time.

Dow Jones industrial average futures were down 486 points, or 4.1 percent, to 11,613, while Standard & Poor's 500 futures were down 62.7 points, or 4.7 percent, at 1,262.

Markets have been plunging amid pessimism about the ability of the US government to prevent a recession. The Federal Reserve has indicated it will lower interest rates further, and President Bush has proposed an economic stimulus package that includes $145 billion in tax cuts, but investors around the world are doubtful that the measures will lift the economy quickly.

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