Tokyo - Japan on Monday predicted its worst annual slump on record as fears of a global swine flu pandemic spread through markets.
As the IMF and World Bank warned of a "human calamity" caused by the global economic crisis, many traders focused on the flu outbreak, which is thought to have claimed 103 lives in Mexico.
Hong Kong and Shanghai dropped 2.73% and 1.20% respectively by noon, while Seoul closed down 1.05%. Tokyo inched up 0.21% and Sydney rose 0.5% with flu fears limiting gains.
Tourism stocks and airlines were hit, with Hong Kong carrier Cathay Pacific slumping 8.4% intra-day, while Australian anti-flu drug producer Biota soared 82%.
European stocks were also hit in early trade, with London's FTSE down 1.2%, the DAX in Frankfurt down 1.9% Paris' CAC-40 in Paris was down 1.83% off.
The yen strengthened against the dollar as Washington declared a public emergency and governments worldwide worked to contain the disease.
"We expect uncertainty to hit the markets this week on growing concerns of swine flu spreading," analysts at NetResearch Asia told Dow Jones Newswires.
"Much like SARS did in 2003, this would deal another blow to the travel and leisure industry, as travel gets curbed from current low levels."
Meanwhile Japan unveiled its latest bleak economic forecast, saying gross domestic product looked set to shrink 3.3% this year - the worst performance since it started measuring growth in 1955.
IMF, World Bank assessment
Finance Minister Kaoru Yosano said the world's second-biggest economy, which saw an estimated decline of 3.1% in fiscal 2008, remained vulnerable to fresh turmoil overseas.
"Against the backdrop of a global recession, exports and production have fallen sharply while employment is deteriorating rapidly," Yosano said.
"The financial climate, such as corporate fund-raising, is also severe. Our country is surely in a state that can be called an economic crisis."
The economy began shrinking in the second quarter of 2007 and suffered an annualised contraction of 12.1% in the last three months of 2008 as the global downturn crushed exports, the country's main growth engine.
The Japanese economy probably shrank at an annualised pace of 14% in the fiscal fourth quarter to March, the Cabinet Office estimated, as it tore up its previous forecast for zero growth in the coming year.
The International Monetary Fund (IMF) and World Bank also gave a stark assessment of the crisis' impact on the developing world, saying the slump had already driven more than 50 million people into extreme poverty.
Millions needed to fight swine flu
The institutions urged countries to speed up delivery of aid pledges, including those made at this month's G20 summit in London.
"Developing countries face especially serious consequences as the financial and economic crisis turns into a human and development calamity," the IMF and World Bank joint development committee said in a statement.
"We must alleviate its impact on developing countries and facilitate their contribution to global recovery," the World Bank's policy steering committee said.
World Bank president Robert Zoellick warned that "no one knows" how long the crisis will last, contrasting with upbeat comments on Friday from G7 finance officials who expected economic activity to start recovering this year.
Zoellick and Mexican Finance Minister Agustin Carstens also said the World Bank would speed more than $205m to Mexico for the fight against swine flu.
The IMF has forecast the global economy will contract 1.3% this year before growth of 1.9% in 2010.
In the latest company results, Japanese electronics giant Sharp announced Monday an annual net loss of $1.3bn, while carmaker Daihatsu posted its first annual decline in profits in seven years.
- AFP