Stocks plunged at the opening on Wall Street Thursday following a panic-driven 10 percent drop in Hong Kong's stock market that raised worries about U.S. companies that depend on Asia for big portions of their profits.
Investors seeking safety poured their money into U.S. Treasury bonds, which shot higher along with the U.S. dollar. Technology companies that have been taking advantage of economic growth in Asia for new sales were off sharply in early trading. Airline stocks, particularly those that depend on traffic to Asia, were also under pressure.Traders were unnerved by overnight dealings in Hong Kong, where the Hang Seng index tumbled 10 percent on the day, for a loss of 23 percent so far this week.
"The fear is that this is going to affect world markets," said Glen Poulter, a stock dealer at Schroders in London. "I spoke to traders yesterday, and none of them were talking about Hong Kong. Today, that's all they're talking about."
The Dow Jones industrial average was off more than 161 points in the first 30 minutes of trading and the Nasdaq Stock Market's composite index was down more than 2 percent.
The plunge by Hong Kong shares sent shudders through European stock markets, where losses were heavy by early afternoon.
At the London Stock Exchange, the biggest in Europe, the blue-chip Financial Times-Stock Exchange 100-share index fell 4 percent. Other major markets were also hammered, with Frankfurt's DAX index closing with a loss of 4.7 percent and the CAC 40 in Paris off by 4.1 percent in the early afternoon.
The key blue chip index, the Hang Seng, shed 14 percent in morning trading before recovering to finish the day with a 10 percent loss. The losses drove down Tokyo's Nikkei Stock Average by 3.03 percent, and shares also took a further battering in Malaysia, Singapore, Indonesia and the Philippines - as well as in Europe.
The fallout in the United States was first felt in Treasury bonds, which trade around the clock and are a traditional haven for fleeing investors in times of crises because of their security.
"It's a flight from tragedy," Robert Brusca, chief economist of Nikko Securities International Co. in New York, said of the bond market's gains.
"Investors are running for cover. In this environment, it means running for bonds," he said.