Image: A trader works at the Stock Exchange in Hong Kong
Mike Clarke  /  AFP - Getty Images
A trader works at the Stock Exchange in Hong Kong on Friday. Financial firms bore the brunt of the pain as stock markets tumbled in Asia after Barack Obama said he would crack down on Wall Street's "reckless" big banks.
updated 1/22/2010 3:44:57 AM ET 2010-01-22T08:44:57

Asian stock markets tumbled Friday after President Barack Obama proposed a sweeping overhaul of Wall Street banks to avert future financial crises.

Losses spread across most markets and sectors across the region, following an overnight retreat in the U.S. Oil prices rose after trading below $76 a barrel while the dollar lost ground against the yen and euro.

Obama said he would seek to limit the size and complexity of large financial companies so their collapse wouldn't imperil the broader financial system and economy, leading to more bailouts at taxpayers' expense. The move comes amid growing public frustration with Wall Street and bank rescues.

As in the U.S., bank stocks fell in Asia but other industries also suffered steep drops as investors scaled back their riskier bets.

The announcement and Wall Street's reaction spooked a market already on edge over China's recent moves to curb bank lending, said Mark Matthews, strategist at Macquarie Capital Securities in Hong Kong.

'Amazing ride'
Adding to the uncertainty are questions about whether this year's economic prospects justify more gains after the run-up in stock prices that began in early 2009.

Last year "was such an amazing ride and people are starting to wonder if the recovery that we're seeing in 2010 was already priced in," Matthews said.

Japan helped lead Asia's declines, with the Nikkei 225 stock average diving 277.86 points, or 2.6 percent, to 10,590.55. Hong Kong's Hang Seng dropped 301.84 points, or 1.5 percent, to 20,550.17 and Korea's main market index lost 2.2 percent to 1,684.35.

Elsewhere, China's Shanghai benchmark fell 0.6 percent, India's market shed 0.5 percent and Australian stocks retreated 1.6 percent.

U.S. futures pointed to slight gains Friday on Wall Street. S&P futures rose 1.5, or 0.1 percent, to 1,112.60.

In the U.S. Thursday, Wall Street was yanked lower by heavy selling in bank stocks.

The Dow fell 213.27, or 2 percent, to 10,389.88, its biggest point and percentage drop since Oct. 30.

The broader Standard & Poor's 500 index fell 21.56, or 1.9 percent, to 1,116.48. The Nasdaq composite index fell 25.55, or 1.1 percent, to 2,265.70.

Oil prices rose in Asia after early losses, with benchmark crude for March delivery up 11 cents at $76.19 a barrel. The contract dropped $1.66 to settle at $76.08 overnight.

The dollar weakened to 90.27 yen from 90.49 yen. The euro was higher at $1.4135 from $1.4082.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Video: Obama takes it to the banks

  1. Closed captioning of: Obama takes it to the banks

    >>> now.

    >>> good evening. we have big stories to cover tonight, including the ongoing tragedy, and in some quarters rising anger from haiti, and something that happened today that will change political campaigning in this country, but we begin tonight with a growing roar. it started yesterday in massachusetts and now you can hear it from inside the white house , apparently. the democrats lost a big senate seat on the election on tuesday. today, the president noting the outrage in this country after the financial collapse said it's time to go after the banks and the bankers. if they want a fight, they'll get one. it did not go over well on wall street . big drop there today. the story is where we begin tonight. our chief white house correspondent chuck todd here with us in our new york studios to start us off. this was a big one day.

    >> it was. in the wake of what some people believe was a revolt of angry independence, the populist revolt. the president came out swinging at wall street and big banks . today the president clearly signalled he's itching for a fight.

    >> so, if these folks want a fight, it's a fight i'm ready to have. and my resolve is only strengthened when i see a return to old practices of some of the very firms fighting reform.

    >> reporter: when the president took office, the first order of business was to bail out banks . ever since then the president and most of washington is fighting the acquisition they are protecting wall street alt. expense of main street . today mr. obama sought to change that perception.

    >> we have to enact common-sense reforming that will protect the american taxpayers and the american economy from future crises, as well.

    >> reporter: the plan if enacted by congress, would close a loophole that currently allows banks to use ordinary depositors' money to speculate on wall street and limit how big banks can be.

    >> never again will american taxpayers be held hostage by a bank too big to fail.

    >> reporter: wall street reacted quickly. stock prices for bank of america , morgan sachs and others fell sharply.

    >> it feels like they rushed this announcement a little bit. the devil will be in the details of what they mean by the prohibitions on the banks .

    >> reporter: the president unveiled his plan on the day massachusetts senate -elect scott brown made his triumphant debut on capitol hill after using populist themes to win what had been a sure democratic seat. aides say the plan, brain child of former federal reserve chair paul volcker had been in the works for months.

    >> those were in the planning before there ever was an election in massachusetts.

    >> reporter: today's action by the president actually was done over the objections of two of his key economic advisors, treasury secretary tim geithner and chief economic advisor larry summers . they argued against doing this, saying it would be too tough on the banks . the president vetoed them, the populist rhetoric winning the day over those that had been criticized for being too close to wall street .

    >> chuck todd starting us off there tonight. to one firm


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