Asian markets tumble on Lehman collapse

TOKYO, Japan (CNN) -- Stocks declined in Asian markets Tuesday, a day after Wall Street's worst day in seven years.

Japan's Nikkei index fell 4.9 percent and Hong Kong's Hang Seng Index declined 5.5 percent while a leading indicator of stock values in South Korea -- the KOSPI index -- went down 6.1 percent.

The stocks tumbled a day after earth-shaking news in the U.S. financial industry sent shock waves up and down Wall Street, raising fears in Asia that a decline in U.S. consumer spending could hurt export-driven economies in Asia.

Asian stock markets were closed Monday, so Tuesday's trading gave Asian traders their first opportunity to react to news from the United States.

The venerable Lehman Brothers investment bank announced Monday it would file for bankruptcy despite frantic efforts to save it.

Then Bank of America bought another Wall Street fixture -- Merrill Lynch -- in an all-stock deal worth $50 billion.

As a result of those dramatic developments, the Dow Jones industrial average lost 504 points, or 4.4 percent, on Monday. It was the biggest one-day decline for the Dow on a point basis since September 17, 2001, when the market reopened for trading after having been closed in the aftermath of September 11, 2001 terrorist attacks. On a percentage basis, it was the biggest decline since July 19, 2002.

The Standard & Poor's 500 index lost 4.7 percent, its worst day since September 17, 2001, when it plunged 4.9 percent. The S&P 500 also closed at its lowest point since October 27, 2005.

The Nasdaq composite lost 3.6 percent, its worst single-session percentage decline since March 24, 2003. It left the tech-fueled average at its lowest point since March 17 of this year.

"It was an ugly day," said James King, president and chief investment officer at National Penn Investors Trust Company. "Lehman's failure to find a suitor and Merrill deciding to cash in their chips before a similar fate could befall them really stoked the fears of the public."

Stock markets in Europe fared poorly on Monday, as well, with leading indexes declining in value by 3.9 percent in London, England and 3.8 percent in Paris, France and Zurich, Switzerland.
Early trading raised concerns in Asia, said CNN's Kyung Lah, but Japanese government officials said the Japanese financial system will recover.

"It has been a very rough ride here in Japan," she said.

A major worry, she said, is that export-driven economies, such as the ones in Japan and China, will suffer in the financial crisis because people in the United States are spending less money on the consumer goods that many Asian countries produce.