LONDON (AFP) - Asian stock markets tumbled on Monday with investors rattled by the bankruptcy of US bank CIT and sharp pre-weekend falls on Wall Street, but Europe edged up on bargain-hunting, analysts said.
Tokyo ended down 2.31 percent, Sydney dropped 2.21 percent and Hong Kong shed 0.61 percent.
Dealers brushed aside last week's US data showing the world's largest economy had moved out of recession and instead focused on New York's losses, where concerns over the financial sector prevailed.
However, there was a 0.49 percent gain midday in Shanghai, where earlier falls were wiped away by figures showing an improvement in China's manufacturing sector.
And Europe's main stock markets edged ahead, with London up 0.35 percent, Frankfurt rising 0.13 percent and Paris 0.38 percent in late morning deals on Monday.
"We have seen investors come in late on Friday and early this morning to bargain hunt in the stocks that had been well beaten last week," said analyst Nicola Poskitt at spread-betting firm City Index.
Wall Street had plummeted 2.51 percent on Friday as confidence whipped up by the gross domestic product data was wiped out by worries that CIT Group, one of the largest small-business lenders in the United States, was in trouble.
Those fears were realised on Sunday when the bank filed for Chapter 11 bankruptcy with its board approving a "prepackaged" restructuring plan to shed 10 billion dollars in debt.
The 101-year-old firm had struggled to stay afloat in the wake of the sub-prime mortgage debacle despite being rescued by a government bailout in July and receiving an emergency loan as recently as October 28.
The news jangled market nerves about the fragile global economic outlook in the wake of the international financial crisis.
"CIT's bankruptcy is a stark reminder that a full-blown economic recovery is still a long way off," said ETX Capital trader Manoj Ladwa.
"The commercial lending market just got tougher as small businesses will struggle to source funds."
In its filing to the US Bankruptcy Court in Manhattan, CIT reported total assets of 71 billion dollars and liabilities of nearly 65 billion, making it the fifth largest bankruptcy in US history.
It said it aims to emerge from court protection by the end of the year.
Dealers were also moved to take profits after the big gains on Friday, which capped a week of losses after the US announced its economy had grown a better-than-expected 3.5 percent in the third quarter.
However, many analysts pointed out that the big rise was helped by the government's enormous stimulus measures including the highly successful "cash for clunkers" programme to boost the ailing car industry.
Markets were also nervous ahead of monetary policy decisions due this week in the United States, the eurozone, Britain and Australia, as well as key US jobs data on Friday.
Despite the losses, market-watchers said financial markets could handle the bad news.
"People are disappointed (with the) slower-than-expected recovery of the US economy. But there's no doubt that the economy is on a recovery track, which will likely prevent a sharper decline," said Jung Seung-jae at Mirae Asset Securities in South Korea.
52.69 (0.46%)
