Asia stocks plunge; Nikkei ends down 4.2% to hit 3-month low

Investing.com - Asian stock markets plunged on Tuesday, following a steep selloff on Wall Street, as concerns the global economic recovery is faltering dampened demand for riskier assets.

During late Asian trade, Australia’s ASX/200 Index closed 1.75% lower, while Japan’s Nikkei 225 Index ended down 4.18%. In Hong Kong, the Hang Seng Index reopened after the Lunar New Year holiday with a 2.85% drop.

Asia was given a negative lead from the U.S., where the Dow Jones Industrial Average and the S&P 500 ended sharply lower after data showed that manufacturing activity in the U.S. fell to a seven-month low in January.

The disappointing manufacturing underlined concerns over the global economic recovery following data which showed that Chinese factory output weakened to a six-month low last month.

In Tokyo, the Nikkei plunged to the lowest level since November 7 as the yen strengthened by more than 1% against the U.S. dollar, weighing on sentiment.

USD/JPY fell to a session low of 100.74, the weakest level since November 21. A stronger yen decreases the value of overseas income at Japanese companies when repatriated, reducing the outlook for export earnings.

Automakers Toyota and Mazda saw shares fall 5.7% and 6.5% respectively, Honda declined 6.3%, while index heavyweights Fast Retailing and Fanuc slumped 3.1% and 4.6%.

Japanese megabanks were also lower with shares of the nation’s largest lender Mitsubishi UFJ Financial Group falling 3.8%, while Sumitomo Mitsui Financial Group and Nomura Holdings retreated 3% and 4.9% respectively.

The Nikkei is down over 13% since hitting a six-year peak of 16,320 on December 30, placing the index firmly in technical correction territory.

Meanwhile, in Australia, the ASX/200 Index fell to the lowest level since December 16 after the Reserve Bank of Australia held its benchmark interest rate at a record low of 2.5% earlier in the session.

AUD/USD rallied to hit a session high of 0.8913 after the central bank signaled that a prudent course looking forward would be "a period of stability in interest rates."

The big four banks were mostly lower following the announcement, with National Australia Bank shares falling 2.4%, Australia and New Zealand Banking Group slumping 1.8%, while Westpac Banking Group and Commonwealth Banking Group shed 1.9% and 1.6% respectively.

Miners also contributed to losses, with BHP Billiton down 2.6%, Fortescue Metals Group falling 1.5%, while Atlas Iron tumbled 3.5%.

Elsewhere, in Hong Kong, the Hang Seng fell to the weakest level since July as shares in the financial sector came under pressure.

China Construction Bank lost 3.2%, Industrial and Commercial Bank of China dropped 2.7%, while China Minsheng Bank and China Citic Bank retreated 2.6% and 2.7% respectively.

Looking ahead, European stock market futures pointed to a lower open. The EURO STOXX 50 futures pointed to a loss of 0.8%, France’s CAC 40 futures shed 0.7%, London’s FTSE 100 futures indicated a decline of 0.6%, while Germany's DAX futures slumped 0.8%.

Across the Atlantic, U.S. equity markets pointed to a flat open. The Dow Jones Industrial Average futures pointed to a gain of 0.05%, S&P 500 futures inched up 0.1%, while the Nasdaq 100 futures were little changed.