Evidence of a weakening Chinese economy, poor data from Japan and Britain and a grim corporate outlook reinforced fears on Tuesday of a prolonged recession fostered by the worst financial crisis in 80 years.
China`s inflation fell to a 17-month low of 4 percent in October and while it posted a record trade surplus last month, a sharp fall in import growth showed domestic demand was flagging.
"It shows the Chinese economy is in a sharp slowdown -- production is falling, so is demand," said Zhang Yongjun, an economist with a government think-tank in Beijing.
In Japan, exports fell nearly 10 percent in the first 20 days of October, corporate bankruptcies jumped 13.4 percent year-on-year and sentiment in its service sector hit an all-time low, all signs the world`s second biggest economy was teetering on the brink of recession.
British retail sales fell for a fifth straight month in October and by the biggest amount in more than three years, and a housing industry survey showed home sales slumped to their lowest level in at least 30 years.
"These are seriously poor numbers, especially in the run-up to Christmas," Stephen Robertson, director general of the British Retail Consortium, said of the sales data.
What began as a financial crisis last year, when bank lending dried up in the face of huge losses in the U.S. housing market, has created a broad downturn in much of the world, with even fast-growing China proving not to be immune.
CORPORATE PAIN
Inevitably, companies that are the building blocks of economies are not escaping unscathed.
Vodafone, the world`s largest mobile phone company by revenues, lowered its full-year revenue outlook and is to cut 1 billion pounds ($1.58 billion) of costs although it reported first half results slightly ahead of forecasts.
Samsung Securities Co, South Korea`s biggest brokerage, reported a 69 percent fall in quarterly net profit due to losses from bond and stock investments on the back of falling financial markets.
And the world`s largest hotelier, InterContinental Hotels Plc, beat forecasts with a 14 percent rise in third-quarter profits but said it saw a sharp deterioration in October market conditions.
Investors, spooked by worries about the worsening outlook for U.S. companies, sold shares.
Japan`s Nikkei share index dropped 3 percent and European stocks shed 2 percent at the open.
Expectations that profits would be hit hard by a deep recession doused Monday`s optimism, sparked by China`s announcement of a nearly $600 billion stimulus package and increased U.S. government support for stricken insurer AIG to the tune of $150 billion.
Deutsche Bank said the equity value of General Motors was now zero, sending its stock to a 62-year low, and analysts said Goldman Sachs could post its first quarterly loss.
U.S. electronics seller Circuit City filed for bankruptcy -- the biggest retailer to do so since Kmart in 2002 -- and coffee chain Starbucks reported disappointing earnings.
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