(Agencies)
Updated: 2008-01-22 20:23

There is also skepticism that American authorities will be able to prevent a recession. The US 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.

"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.

Oil and gold prices also fell. Light, sweet crude for February delivery fell to $87.72 a barrel on expectations that slower US growth will lead to less demand for crude. Spot gold, which usually benefits from market uncertainty, fell to a two-week low of $855.20 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 523 points, or 4.3 percent, to 11,583, while Standard & Poor's 500 futures were down 64.4 points, or 4.8 percent, at 1,260.

Noritsugu Hirakawa, who monitors stock trading at Okasan Securities Co. in Tokyo, said investors were spooked by the drastic falls on Chinese and Indian markets -- the two emerging economies that are viewed as sustaining global growth even as the US economy sputters.

"The end to the slides in Asian stocks is nowhere in sight," he said. "There is even speculation that China may be exposed to the US subprime mortgage crisis."

Indonesia's benchmark index closed the day down 7.7 percent, Singapore's Straits Times index sank 6 percent and Taiwan's market fell 6.5 percent.

Asian markets have been in a downward spiral for most of January. Since the start of the year, Japan's Nikkei index has tumbled nearly 18 percent, while the Hang Seng is down a stunning 22 percent.

Even the usually upbeat Japanese Economy Minister Hiroko Ota acknowledged that threats were growing.

"We must take the approach of working together with other nations on this," she said on nationally televised news.

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