HONG KONG — The turmoil in the world’s financial markets showed no sign of abating on Tuesday, with relentless selling once again sending stock markets in Asia sharply lower as investors dumped equities in favor of traditional havens like gold and U.S. Treasury securities.
Some of the steepest decreases were seen in South Korea and Hong Kong, where the main market indexes slumped 5.2 percent and 6 percent, respectively, by midafternoon. The Nikkei 225 index in Japan sagged 2.7 percent, Australia and Taiwan retreated about 0.5 percent, and the main market gauge in Indonesia gave up 3.1 percent.
Once again, investors shrugged off the fact that Asian economies — with the exception of Japan — remain in fundamentally good shape, with growth rates far above those in the West and debt levels well below those in many developed nations.
“When you get declines of this sort, it is technical factors and emotion that drive markets — the fundamentals are largely irrelevant,” said Stephen Davies, chief executive of Javelin Wealth Management in Singapore, referring to Wall Street’s plunge on Monday. The stock market there saw its worst day since December 2008, in the midst of the global financial crisis.
The Dow Jones industrial average fell 5.6 percent, and the Standard & Poor’s 500-stock index dropped 6.7 percent, accelerating a sell-off that began a couple of weeks ago.
Futures on the S.&P. 500 were down 1.7 percent during the Asian day on Tuesday, signaling that U.S. markets could sag again Tuesday.
Mr. Davies of Javelin Wealth Management characterized sentiment in Asia as “weary resignation” rather than outright panic, but he said that the markets in general had been caught in a “negative feedback loop” — where declining markets fuel worries about the economic fallout of the turmoil, which in turn undermines sentiment further.
The fear is that the upheaval could ultimately weaken the wider economy by constraining the ability and willingness of banks to extend credit to businesses and making it harder for companies to raise money from the capital markets.
On Tuesday in the United States, a few obscure but important parts of the credit market also showed signs of stress. For example, the market for commercial paper, short-term loans that companies use to finance themselves, became less favorable. This was not nearly as bad as during the financial crisis, but people will be keeping an eye on it to see if conditions deteriorate.
Friday’s decision by Standard & Poor’s to downgrade the United States’ credit rating — once deemed bulletproof — deepened the uncertainty but was not in itself the only cause of the current sell-off, many analysts and market strategists believe.
Rather, the downgrade, combined with the widening of the debt worries in Europe, highlighted the fact that governments in many parts of the developed world are having to rein in spending at a time when private-sector spending is still anemic.
“The fear is that when you remove that prop, the chances of recession go up,” Mr. Davies said. “Chances of a double-dip recession have increased markedly in the last few weeks.”
Analysts at Royal Bank of Scotland echoed that assessment, noting in a research report that although they did not believe that a renewed recession was the most likely outcome, the odds of a double dip in the United States had increased “given the risk of negative psychology feeding on itself, and with the economy already looking more fragile.”
These concerns have helped send equity markets around the world sharply lower in recent weeks, while pushing “safe haven” assets like gold, the yen and the Swiss franc to record levels.
The S.& P. 500 is now down 18 percent from its April 29 peak and is nearing official bear market territory, defined as a fall of 20 percent.
Gold, by contrast, has soared from $1,485 per ounce at the start of July, vaulting the $1,700 mark on Monday and rocketing to just under $1,770 at one point on Tuesday.
Officials in Asia tried to soothe markets on Tuesday by stressing that they were closely monitoring the situation.
“I will pay close attention to market movements with a sense of urgency today,” Japan’s finance minister, Yoshihiko Noda, was quoted by Reuters as saying.
Australia’s prime minister, Julia Gillard, told reporters, “We will continue to see economic growth,” according to Reuters.
“We should also get a degree of confidence from the strong fundamentals of our economy,” she said. Australia has been booming recently thanks to the strength of the Chinese economy, which imports massive amounts of iron ore, copper and other commodities to fuel its growth.
Graham Bowley contributed reporting from New York.
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