Asian markets suffered sharp falls on Friday after the Dow Jones in New York hit a two-year low overnight and oil hit a new high above $140 a barrel.

China's main index fell nearly 4.5%, and stock indexes in Japan, Taiwan and South Korea all shed more than 2%.

India's benchmark index In my tribe ...
Asian nations agree to establish crisis fund ... was down more than 4.3% in early trade.

Oil eased back slightly from its earlier record set in New York, to stand at $138.90 a barrel in midday trade in Singapore.

The fear on Wall Street, where the Dow fell more than 3%, is that rising prices and tighter finances will force Americans to curb spending and push the economy into recession.

Investors reacted to a string of bad news about several sectors of the US economy, a prime market for Asian exporters, while worries remain about the credit crunch and sub-prime fallout.

'Risk averse'

"We've still got bad news on the credit crunch, we've got bad news about consumers," said Garry Evans, pan-Asian equity strategist at HSBC in Hong Kong.

"The macro environment is not a good one and people are very risk averse."

The fall in Tokyo also came after signs that oil and commodity prices were fanning inflation and causing consumers to hold back from spending.

Meanwhile, uncertainties faced by China's economy due to the global economy and markets have increased, said Su Ning, deputy governor of the Chinese central bank.

"According to the mainstream viewpoint in the international community, the biggest part of the sub-prime-related crisis has passed, but the impact of the crisis is continuing," he said.

"There are different views on the trend of the dollar, and the rise of oil prices and their impact on the world economy. These things increase external uncertainties for China's economy."

Bleak company outlook

The negative mood has been compounded by a gloomy outlook from companies in the US financial, automotive and high-tech sectors.

Analysts said traders feared banks and lenders would take longer to recover from the turmoil in the sub-prime mortgage and credit markets.

Citigroup shares fell 6.3%, while Merrill Lynch dropped 6.8%.

Meanwhile, a downbeat assessment of how General Motors would weather the economic storm dragged its shares down 10.8% to close at $11.43, the lowest level in more than 33 years.

Technology stocks plunged too after industry bellwethers Oracle and Blackberry maker, Research In Motion, made worse-than-expected forecasts.

(BBC)

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