(Deletes reference to consecutive losses in Singapore in
paragraph 9)
* Even some safe havens liquidated for cash
* Oil falls on expectations of global recession
* VIX "fear index" surges
* Federal Reserve seen cutting rates to 1 pct this month
(Adds bullet points and quote, updates prices)
By Kevin Plumberg
HONG KONG, Oct 10 (Reuters) - Asian stocks plunged on
Friday, with Japan's Nikkei down more than 10 percent, while
the yen and U.S. Treasuries rose, as panic ripped through
markets and investors shrugged off efforts so far to unlock
credit markets.
A synchronised cut in borrowing costs by central banks
around the world this week is seen as too little, too late, and
investors doubt a meeting of the Group of Seven rich nations
later on Friday can achieve much, with fears growing that the
global economy is shifting towards recession.
U.S. government debt and the yen have become refuges from
the worsening financial crisis that overnight knocked the U.S.
S&P 500 stocks index <.SPX> down 7.6 percent to a 5-year low.
But cash was ultimately king, with even Japanese government
bonds being liquidated for funding.
Fears of a looming world recession that would sap demand
for raw materials dragged oil prices down to a 12-month low
below $84 a barrel.
"No one is buying. Fundamentals don't matter any more and
there's no explanation for such a plunge," said Yoshinori
Nagano, chief strategist at Daiwa Asset Management in Tokyo, of
the selloff in Japanese stocks.
The Nikkei share average <> was down 10.6 percent,
bringing the week's losses to more than 20 percent.
Unlisted Yamato Life Insurance Co filed for bankruptcy
protection because of market turmoil, shocking investors who
had thought Asia's financial sector, especially Japan's, was
relatively stable compared with Europe and the United States.
The MSCI index of Asia-Pacific stocks excluding Japan
<.MIAPJ0000PUS> was down 5.7 percent to the lowest since June
2005, and has fallen 19 percent this week alone.
Singapore's Straits Times index <.FTSTI> fell more than 7
percent, and data confirmed one of Asia's richest economies was
in a recession.
The Chicago Board Options Exchange's Volatility index
(VIX), seen as a fear index, hit an all-time high of 64.92
<.VIX>, as investors scrambled to buy increasingly expensive
protection against erratic price action.
With global equity markets declining with brutal swiftness,
investors have rushed to U.S. Treasury debt despite weakness in
recent days on expectations for a glut of new issuance.
The 10-year note <US10YT=RR> rose 21/32 in price, taking
its yield to 3.70 percent from 3.78 percent. Rates on one-month
T-bills fell to just 0.045 percent, from 0.080 on Thursday and
1.55 percent as recently as Sept. 11, as the very short end of
the market continued to act as a source of funding with other
avenues all but shut down.
WHAT MORE CAN BE DONE?
Credit markets were nearly broken. The cost of protection
against defaults in Asia's sovereign and corporate debt soared
to record highs, traders said.
The iTRAXX Asia ex-Japan high-yield index <ITAHY5Y=IE>, a
key measure of risk aversion for the region's "junk"-rated
credit, soared about 90 basis points to a record 890/940 bps, a
Singapore-based fund manager said. But traders warned of little
activity in the credit markets, which tends to magnify price
differences.
Extreme market volatility stoked talk that the major
central banks would have to reduce interest rates again, just
days after a concerted round of cuts led by the Federal Reserve
and European Central Bank. There were also reports the U.S.
Treasury was under intense pressure to inject funds directly
into commercial banks.
"It highlights the enormity of the issue and the problem
faced by the G7," said Adam Carr, a senior economist at broker
ICAP. "Given the muted response in markets, certainly I think
more rate cuts are to come, as ineffective as they are proving.
Lets hope the G7 propose a good dose of fiscal medicine to the
real economy as well."
Whether or not global policymakers have anything more
planned, time was running thin.
The spread of 3-month London interbank offered rates over
the 3-month U.S. Treasury bill yield widened to 426 bps,
increasing more than 300 bps in the last month, with cash being
hoarded and practically no lending between banks.
Japanese government bonds plunged as much as 1.99 points to
136.47, with investors in a frantic rush to secure cash with
domestic money markets succumbing to the freeze around the
world.
The euro slid to a three-year low of 132.80 yen before
trimming losses to 135.00 yen <EURJPY=R>, down about 0.6
percent from late U.S. trade.
The U.S. dollar hit a six-month low of 97.91 yen before
clawing back to 99.40 yen <JPY=>, down 0.5 percent on the day.
U.S. crude oil futures <CLc1> fell 5 percent to a fresh
12-month low in electronic trade on Friday on concerns the
growing financial crisis would sap demand for fuel.
(For more on the crisis, click [])
(Additional reporting by Wayne Cole in SYDNEY and Rafael Nam
and Umesh Desai in HONG KONG)
(Editing by Ian Geoghegan)
