US woe sends Nikkei reeling

DIRE overnight performances on Wall Street and Nasdaq rocked

The Nikkei 225 Average was also hurt by changes to the Morgan Stanley Capital Indices. Japan's weighting in its global series was cut from 8.14% to 7.66%, which will force fund managers to dump some of their Japanese holdings, particularly in telecommunications stock, which bore the brunt of the MSCI changes.

This piled more agony on the sector, which was already suffering from Nasdaq's 2.37% dive, while warnings on the outlook for British mobile phone operator Vodafone spurred selling of cellphone giant NTT DoCoMo. It tumbled more than 5%, a major drag on the Nikkei 225, which lost 181.65 to 10,965.62.

Bank stocks continued to ease ahead of the official publication today of the Financial Services Agency's report on the extent of Japan's bad loan mountain.

The impact will be eased by earlier leaks, which today had Japanese ministers seething, but which have given investors time to adjust their holdings ahead of the full report. An expected eight trillion yen (£43 billion) of loans will have to be written off, which is in line with market expectations, said analysts.

There was more mayhem in other financial stocks after reports that the big brokerages faced declines of up to 90% in the year to end-March. Market leader Nomura slumped 2.5% while smaller houses were hit with falls of up to 4%.

Hong Kong stocks were hardly touched by the MSCI rebalancing act, but New York's action took its toll and the Hang Seng index slid 88.32to 10,656.59.

Property stocks continued to be the dead weight on the market as any signs of a revival in demand and a pick-up in prices continued to recede. Top loser was Sino-Land, one of the major developers, and its stock fell 2.65%. Micro motors group Johnson Electric, a recent favourite, was one victim of the MSCI changes, and a downward weighting saw the shares fall almost 3%.

Recently battered South Korean stocks began to pick up speed, and the Kospi gained 3.46 to 866.32, although last month's push through 900 seems a distant memory. Bank stocks were the top performers, on hopes of major consolidation in the sector, but their strength was largely countered by weakness in technology shares.

A downward rating of Taiwan by MSCI was shrugged off as it also upgraded some individual technology stocks, enabling the Weighted Average to score a 74.44-point gain to 6148.20.

Concerns over interest rates continued to hang over Sydney stocks, pulling the All Ordinaries down 9.2to 3310.6, but banks responded with modest gains after housing starts data suggested the economic recovery might not be as swift as expected.

Singapore's Straits Times index dipped 1.27 points to 1739.31 after recent gains on new tax breaks to boost the economy, and in Malaysia, the Kuala Lumpur Composite drifted 1.30 to 773.46. Thailand's SET index shed 0.75 to 377.20, but a 4.74-point gain to 536.26 took Jakarta's Composite to within one point of a 50% rise this year.

Prices and indices in this report are from various sources and calculated at different times and may not always match those listed elsewhere on the site.