Asian, Pacific stock markets plunge

(CNN) -- Asian and Pacific stocks nosedived Tuesday, with the major exchanges posting sharp declines a day after grim U.S. economic news battered Wall Street.

Japan's Nikkei index dove nearly 6.4 percent, while Australia's All Ordinaries ended down 5 percent.

The Australian exchange opened lower and fell further after the country's central bank announced it would cut its benchmark interest rate by a full percentage point to 4.25 percent.

"The Australian economy has been more resilient than other advanced economies, but recent data nonetheless indicate that a significant moderation in demand and activity has been occurring," the bank announcement stated. "With confidence affected by the financial turbulence and a decline in the terms of trade now under way, more cautious behavior by both households and businesses is likely to see private demand remain subdued in the near term."

In South Korea, Seoul's KOSPI was back down 3.5 percent after a midday attempt at rallying, and Hong Kong's Hang Seng index had dropped slightly over 5 percent by late afternoon.

The Shanghai composite index had bucked the trend with a modest gain earlier, but was down about 0.8 percent by late afternoon.

The skids followed a sharp dip in the U.S. markets Monday, when Wall Street was hammered by investor bailouts and economic analysts concluded the United States is mired in a recession that is likely to continue for some time.

The Dow Jones Industrial Average lost 680 points, its fourth-biggest single-session decline on a point basis ever. The decline was 7.7 percent in percentage terms -- the 12th worst percentage one-day decline ever. It ended at 8,149.

The Standard & Poor's 500 index Monday fell 8.9 percent, and the Nasdaq composite gave up 9 percent.

Year-to-date, the Dow is down 38.6 percent and has lost 42.5 percent from its record close of 14,164.53 on October 9, 2007.

Stocks slid throughout the morning as investors sorted through early holiday sales reports and weak readings on manufacturing. But the selling accelerated in the afternoon after the National Bureau of Economic Research confirmed what many have long believed -- that the nation is in a recession. According to the NBER, the official body that calls economic cycles, the United States has been in a recession since December 2007.

"The economy stinks, the manufacturing report didn't come out well, and the announcement from the NBER didn't help," said Ram Kolluri, president at Global Investment Management.

"There's a real nervousness about the economy," he added.

Monday afternoon, Federal Reserve Chairman Ben Bernanke said that the economic weakness will continue for some time, despite the impact of the government's efforts to get money flowing again. And Treasury Secretary Henry Paulson said the downturn is significant.

Global economic news was pretty grim as well, with manufacturing surveys in Britain and the euro zone showing a steep slowdown. A reading on China's manufacturing survey was equally worrisome.

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