Asia stock markets fall on Wall Street shake-up

HONG KONG - Asian stock markets tumbled Monday as investors reacted with alarm to a seismic shake-up on Wall Street involving the bankruptcy of Lehman Brothers and the takeover of Merrill Lynch.

Asia's biggest stock exchanges in Japan, Hong Kong and South Korea were closed for holidays, but every market open was deep in the red.

India's Sensex plunged 5.4 percent, Taiwan's benchmark plummeted 4.1 percent, Australia's key index was down 2 percent and Singapore dropped 2.9 percent.

The declines came as Wall Street and the U.S. government took a series of steps aimed at bringing an end to the credit crisis that has roiled the global financial system for more than a year.

Troubled U.S. investment bank Lehman Brothers Holdings Inc. announced it would file for bankruptcy after prospective buyers, including Barclays PLC, backed away from a deal.

Also, Bank of American Corp. said in a statement early Monday that it would acquire Merrill Lynch & Co. in an all-stock transaction worth about $50 billion.

A global consortium of banks, meanwhile, announced late Sunday a $70 billion pool of funds to lend to ailing financial companies, a move geared toward preventing a worldwide panic on stock and other financial exchanges. The U.S. Federal Reserve chipped in with more largesse in its emergency lending program for investment banks.

The shake-up was needed to restore confidence in the markets, said Lorraine Tan, director at Standard & Poor's equity research in Singapore.

"A lot of people are getting burned," she said. "It's better to get this out of the system. Hopefully for the U.S. this could be it as far as potential failures of investment banks."

Investors fearful that the financial distress could spread to Asia to sent regional bank stocks plunging.

Macquarie Group Ltd., Australia's largest investment bank, plummeted 9.6 percent. In Taiwan, Shin Kong Financial Holding lost 6.9 percent.

U.S. stock index futures were down sharply, suggesting that shares would drop when trading opened in New York Monday morning. The Dow Jones industrial average futures were down 309 points, or 2.7 percent, at 11,149, while Standard & Poor's futures were down 3.2 percent to 1,218.

The dollar also tumbled, falling to 105.69 yen from 107.92 yen late Friday, while the euro jumped to $1.4432 from $1.4229 Friday.

Oil fell below $100 a barrel in Asian electronic trading after Hurricane Ike inflicted minimal damage to oil installations on the Texas coast. Light, sweet crude for October delivery declined $2.10 to $99.08 a barrel.

On Friday, the contract slipped to $99.99 per barrel briefly before closing at $101.18. The last time Nymex crude had traded below the $100 mark was April 2.