* Even some safe havens liquidated for cash
* Oil nears $82 on expectations of global recession
* VIX "fear gauge" surges as credit drought worsens
* Nikkei's 24 pct decline in week
(Updates prices, adds European open)
By Kevin Plumberg
HONG KONG, Oct 10 (Reuters) - Asian stocks plunged on
Friday, with Japan's Nikkei down 24 percent in the week, while
the U.S. dollar rose to a 14-month high against a group of
major currencies, on panic that global efforts so far have
failed to stop financial chaos from spreading.
European shares <> opened 4 percent lower with waves
of negative sentiment crashing overseas. U.S. stock futures
<SPc1> were down 3 percent, pointing to a steeply lower open on
Wall Street.
A synchronised cut in borrowing costs by central banks
around the world this week was seen as too little, too late,
and investors doubted a meeting of the Group of Seven rich
nations later on Friday could achieve much, with fears growing
that the global economy is headed towards recession.
U.S. government debt and the yen have become shelters 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 sharp slowdown in demand for raw materials from
heavy consumers like China and the United States dragged oil
prices down to a 12-month low below $83 a barrel.
"It's impossible to predict the bottom, and technical
analysis is meaningless as panic and fear overwhelm the
markets," said Jang Huh, managing director at Prudential Asset
Management in Seoul.
The Nikkei share average <> finished down 9.6 percent,
bringing the week's losses to 24 percent, more than twice what
it lost during the week of the 1987 stocks market crash.
Japan has a market holiday on Monday, so investors did not
want to be caught unprepared.
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 7 percent to its lowest in almost four
years and has fallen 20 percent this week alone. The
all-country world stocks index fell to the lowest since
November 2003 <.MIWD00000PUS>.
Hong Kong's Hang Seng index <> dropped 8 percent to a
near three-year low. The market value of companies listed on
the index has lost almost half its value since the year began.
South Korea's KOSPI <KS11> ended 4.1 percent lower,
managing to cut some of its losses after the heads of local
brokerages met to propose a market stabilisation fund.
The Chicago Board Options Exchange Volatility index (VIX),
seen as a gauge of investor fear, on Thursday hit an all-time
high of 64.92 <.VIX>, as investors scrambled to buy
increasingly expensive protection against erratic price action.
Global equity markets have declined with brutal swiftness,
sending investors 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 5/32 in price, taking its
yield to 3.75 percent from 3.78 percent. Rates on one-month
T-bills fell to just 0.066 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 in Sydney. "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 bond futures dropped 1.1 points to
137.35, 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 133.70 yen <EURJPY=R>. The U.S. dollar hit a
six-month low of 97.91 yen before clawing back to 98.70 yen
<JPY=>.
The Intercontinental Exchange's U.S. dollar index <.DXY>,
which measures the dollar's value against a basket of major
currencies, climbed 0.6 percent to 81.939, the highest since
August 2007.
U.S. crude oil futures <CLc1> fell 4.9 percent to $82.33
after earlier hitting a 12-month low of $82 a barrel on
concerns the growing financial crisis would sap fuel demand
from countries like China.
The slowdown in the country's property and manufacturing
sectors means it will take time to work through its metals and
other raw materials stockpiles.
"With a steady stream of negative news dampening sentiment
across the commodities complex, market players are hoping for
supportive government measures to arrest the decline in
commodity and equity prices," said Jing Ulrich, managing
director and chairman of China equities with JPMorgan in Hong
Kong.
Spot gold <XAU=> was relatively unchanged at $911 an ounce,
though it gained 9.1 percent in the week.
(For more on the crisis, click [])
(Additional reporting by Park Jung-youn in SEOUL, Wayne Cole
in SYDNEY and Rafael Nam and Umesh Desai in HONG KONG, editing
by Dhara Ranasinghe)
