By Tom Miles Reuters

HONG KONG (Reuters) - Stock indexes in Asia fell between 1-3 percent and the dollar hit a 2-½ year low against the yen on Wednesday after a record loss at financial powerhouse Citigroup and weak U.S. retail sales entrenched fears the world's top economy may slide into recession.

The U.S. housing market turmoil and global credit crisis have roiled Asia's stock markets for months, but news that Citigroup Inc rival and Merrill Lynch & Co Inc raised another $20 billion (10.2 billion pounds) of capital from investors quickened worries that the worst confessions from financial institutions are yet to come.

In early Asian trade the dollar plumbed 106.59 yen, the lowest since June 2005, before recovering some poise to trade at 106.75 yen on market talk that the Federal Reserve was holding an emergency meeting to cut interest rates immediately.

"It's hard for anyone to buy the dollar at the moment as people are very pessimistic about the U.S. economy, haunted by the possibility of a recession there," said a trader at a Japanese trust bank.

Tokyo's Nikkei index fell to a 26 month low and was down 0.9 percent by the midsession as investors dumped shares of major banks, with Mizuho Financial Group, Japan's second-biggest, falling nearly 5 percent after it said it would buy $1.2 billion of Merrill stock. For details, see

The Dow Jones industrial average fell 2.2 percent, to close at 12,501.11 on Tuesday. Each index component ended lower.

Citigroup fell 7.2 percent after posting a quarterly loss of $9.83 billion, adding to concerns that the worst of the impact on financial companies from the global credit crisis may be far from over.

"What we are seeing is a selling climax," said Yoshihiro Ito of Okasan Capital Management. "Concerns for the U.S. economy came to surface with weak retail sales and other data that has led to a selling spree."

U.S. banks Merrill Lynch and JP Morgan are also due to release quarterly results this week, giving jittery investors no respite from the febrile U.S. banking sector.

"The question is whether the banks will continue to announce such big writedowns in the next quarters, or they are taking one bold writedown this time. More people are fearing this is far from over," said Rho Y.S., an analyst at Hyundai Securities.

WHERE WILL THE BUCK STOP?

Unexpectedly poor U.S. retail sales figures, worries about delays to Boeing's 787 Dreamliner long-haul jet and lacklustre quarterly results from Intel Corp weighed on sentiment.

The Korea Composite Stock Price Index fell 2.56 percent by 12:43 a.m. British time, its lowest level since August 20.

Australia's benchmark S&P/ASX 200 index fell 151.7 points to 5,808.3 by 1:17 a.m. British time.

"I think it stops when people think it has gone far enough and I don't get that sense yet," said Sydney-based Brian Eley, a portfolio manager with Eley Griffiths Group.

The flight from equities lifted bond prices, propelling the yield on benchmark U.S. 10-year Treasuries to 3.68 percent, down eight basis points and a new four year low. Two-year yields also slipped to levels not seen since March 2004.

Even safe-haven gold retreated below $900 an ounce after failing to claim a new record above $914 on Tuesday, as fears about demand outweighed buyers looking for a refuge from the stormy equities markets.

Copper also slipped as the market began to fret about an economic slowdown and weakening demand from the United States and China, which could pull the rug from under a demand-led rally. In Shanghai, copper and zinc futures both fell by their daily limit in early trade.

Oil prices also lost ground. U.S. crude settled $2.30 lower at $91.90 a barrel and lost a further 5 cents in Asian trade. London Brent fell $1.94 to $90.98.

"All signs point to a recession, which could be a precursor to demand destruction," said Nauman Barakat, an oil trader and senior vice president at Macquarie Futures USA.

MSCI's measure of Asia Pacific stocks excluding Japan was down 2.3 percent by 2:03 a.m. British time.

NEW YORK (Reuters) - World stocks fell further on Friday, leading bond yields mostly lower, after an economic stimulus package announced by President George W. Bush left investors somewhat disappointed.

Bush called for a package of tax cuts and other measures totalling around 1.0 percent of U.S. gross domestic product, or up to $150 billion (77 billion pounds), after weak recent reports on employment, retail sales, factory activity, and housing construction this month suggested the United States -- the world's largest economy --may be heading into recession.

Under consideration in the package announced by Bush are ideas like tax rebates, incentives for businesses, and extensions of unemployment insurance.

"The fear is that the plan and even the Fed may not have enough firepower to turn the path to recession around," said Richard Sparks, senior equities analyst at Schaeffer's Investment Research in Cincinnati.

Earlier this week Federal Reserve Chairman Ben Bernanke again pledged that the U.S. central bank was ready to act to prop up economic growth, reinforcing expectations for interest rates cuts at the Fed's next policy meeting on January 29-30.

In the United States, the benchmark S&P 500 stock index on Friday ended its worst week in 5-1/2 years.

Financial and telecommunications companies, including insurer American International Group and Sprint Nextel Corp , were among the top decliners on the S&P 500.

The Dow Jones industrial average was down 59.91 points, or 0.49 percent, at 12,099.30. The Standard & Poor's 500 Index was down 8.06 points, or 0.60 percent, at 1,325.19. The Nasdaq Composite Index was down 6.88 points, or 0.29 percent, at 2,340.02.

U.S. markets are closed on Monday for the Martin Luther King Day holiday.

European stocks also ended lower, dropping for the 10th time in 13 sessions as banks and insurers tumbled on renewed worries over mortgage-related losses, while investors gave a cold initial reception to the U.S. economic stimulus package.

The FTSEurofirst 300 index of top European shares ended down 1.2 percent at 1,358.51, capping a dismal week during which Europe's benchmark index lost 4.8 percent.

The FTSEurofirst 300 index has lost nearly 9.0 percent since the beginning of 2008, as worries about the U.S. economy tipping into recession knocked equity markets worldwide.

"The persisting pressure on the financials suggests the credit crisis harbours further risks for overall market," Tammo Greetfeld, equity strategist at HVB, wrote in a note.

He cited risks that the banks may have to take "provisions for the credit risks emanating from a general deterioration in the credit portfolio because of a slowing economy."

Earlier on Friday, Japan's Nikkei average recovered from an early dive to end 0.6 percent higher at 13,861.29 points, lifted by expectations for the U.S. economic stimulus package.

BOND YIELDS LOWER BUT U.S. DOLLAR STEADY

Bond yields also fell as stocks lost more ground on investor fears the White House stimulus package might not keep the U.S. economy from sliding into recession.

"It is probably going to be too little and too late," said Mary Ann Hurley, vice president of fixed-income trading at D.A. Davidson & Co. in Seattle.

The U.S. two-year Treasury note yield fell to a three-year low around 2.35 percent, while European government bond yields fell for the fourth straight week, with the two year Schatz yield ending around 3.46 percent, and the Japanese two-year note yield slipped to 0.575 percent.

The U.S. dollar was little changed though as investors weighed the likely impact of the Bush fiscal package.

"The market is no longer viewing the U.S. economic slowdown in isolation. Although domestic demand-based emerging market growth will provide a counterbalance, a cyclical global moderation now appears more likely," UBS said in a note to clients.

The euro ended the week around $1.4626, while against the U.S. dollar the yen was steady around 106.6 yen.

Investors said the dollar's problems are not over yet with the longer-term outlook for the U.S. economy remaining bleak.

U.S. crude oil prices edged up to above $90 a barrel after a three-day slide. On the New York Mercantile Exchange February crude was up 42 cents at $90.55 per barrel. Crude oil prices hit a record just over $100 a barrel on January 3 before slipping back on concerns about slowing demand due to the threat of a global economic slowdown.

Gold also firmed slightly from a one-week low and ended around $883.90 an ounce, after seeing a record around $914 earlier this week.

"External factors such as higher inflation expectations, broader economic concerns, geopolitical tensions and Fed rate easing are likely to drive prices higher," Barclays Capital said in a report.

SINGAPORE (Reuters) - Stocks in Asia resumed their decline on Monday, led by banks like Japan's Mizuho, while the dollar hovered near a 3-year low against the yen after a proposed U.S. stimulus package did little to soothe fears the world's top economy will tip into a recession.

Stock markets in Japan, South Korea and Australia nursed losses of between 1.3 and 3 percent, dragged lower by banks and financial companies as the sector continues to suffer the worst fallout of the U.S. subprime mortgage crisis.

Demand for government bonds kept Japan's bonds firm as investors sought a safe haven in the face of deteriorating economies and slumping stocks.

March 10-year futures hit a 2-year high with a 0.29 point to 138.41. The five-year yield fell 2 basis points to 0.835 percent, the lowest since January 2006.

Last week President George W. Bush called for package of tax cuts and other measures of around $140 billion to $150 billion to shore up the U.S. economy, battered by the subprime mortgage crisis and subsequent credit crunch.

But the move did little to shore up sentiment in stock markets.

"It's clear that investors are still very cautious," said Craig James, chief equities economist with Commsec in Australia. "We'd have to see some strength in Asia today to turn this situation around.

Tokyo's benchmark Nikkei was down 3 percent by 0133 GMT. The index has shed a quarter of its value since July, when concerns that the U.S. subprime mortgage crisis would permeate global financial markets first reared their head. Banks extended recent losses on fears they will reveal more credit-related losses, with Mizuho Financial Group down around 2 percent.

In Seoul worries over the health of the United States -- a top export market -- hit stocks like flat screen maker LG.Philips LCD Co Ltd . The benchmark Korea Composite Stock Price Index was down 1.3 percent.

Australia's S&P/ASX 200 index fell 2 percent.

MSCI's broadest index of shares outside of Japan was down 0.9 percent by 0113 GMT. The index has shed only around 3 percent since July as some investors reckoned emerging markets would emerge from the credit crisis relatively unscathed.

MSCI's All Country index has lost 12 percent in the same period.

On Wall Street on Friday the Dow Jones industrial average and the Standard & Poor's 500 Index fell around 0.5 percent each.

DOWNWARD DOLLAR

Japan's yen held gains against the dollar, supported by an unwinding of risky positions as continuing losses in Japanese stocks kepts investors alert to the possibility of a U.S. recession and its potential effect on other economies.

"There's no change in the momentum to sell the dollar," said Hideki Amikura, a forex manager at Nomura Trust and Banking. "More Nikkei losses are likely to push the dollar/yen lower."

By 0128 GMT the dollar traded at 106.83 yen, little changed from late last week, when it fell as low as 105.92 yen, its lowest since May 2005.

Oil inched towards $91 a barrel, with prices supported by the closure of Mexico's oil export terminals due to bad weather, as well as OPEC's dismissal of calls to raise output.

U.S. light crude for February delivery rose 33 cents to $90.90 a barrel in Asian trade.

Among metals, gold edged lower as Bush's tax cut plan failed to inspire buying. Spot gold was trading at around $879.00 an ounce, down from $881.90/882.60 in New York on Friday.

SINGAPORE (Reuters) - Stocks tumbled across Asia as panicky investors feared a U.S. recession could derail global economic growth, and a sharp drop in U.S. stock index futures pointed to heavy selling in New York later on Tuesday.

Share markets from Tokyo to Sydney slumped 5-7 percent, with the Australian market suffering its worst-ever one-day fall, and India's benchmark Sensex crashed more than 11 percent, triggering a trading halt.

Industrial metals such as zinc and copper plunged and oil fell well below recent record highs, prompting investors to flee to safe-haven government bonds.

Billionaire investor George Soros said the world was facing the worst financial crisis since World War Two and the United States was threatened with recession.

"We really do have a serious financial crisis now," Soros told Austrian daily Standard in an interview.

"It's like a funeral in here," said Ken Masuda, senior equities dealer at Shinko Securities in Tokyo. "No one knows what's going to happen tonight in New York. It's like we've gone blind, you don't know what's coming.

"Until we see New York, all we can do is sell," he said.

U.S. stock index futures fell around 4.5 percent, signalling a sharp sell-off on Wall Street later.

The yen hit a 2-1/2-year high against the dollar at 105.61 yen as investors reduced their exposure to risky, higher-yielding assets. The strong yen hit Japanese exporters such as Toyota Motor Corp, Sony Corp and Canon.

MSCI's All Country World Index fell 1.1 percent to its lowest since November 2006, after European shares tumbled nearly 6 percent on Monday, their biggest one-day slide since the September 11, 2001 attacks in the United States. The MSCI All Country index has dropped more than 18 percent since its November peak.

MSCI's Emerging Market index, which on Monday had its worst daily fall since August, shed 3.5 percent.

Japanese treasuries surged as alarmed investors sought the relative safety of government debt. March 10-year futures rose 0.3 point to 138.77 after earlier touching 138.94, the highest since September 2005.

The widely-followed iTRAXX Asia ex-Japan high-yield index, a key measure of risk aversion, widened, and some investors called on central banks to restore confidence.

"The market is looking for news to provide a circuit breaker to the downward spiral, whether it's reinforcements from governments or intervention from central banks," said Matt McKeith, head of equity dealing at First State Investments in Hong Kong.

Indian Finance Minister Palaniappan Chidambaram urged investors to stay calm, insisting the fundamentals of the economy remain strong.

The Bank of Japan kept interest rates at 0.5 percent as expected and is set to warn of slower growth in an economic review due later.

BEAR MARKET FEAR

U.S. equity markets, shut on Monday for a holiday, ended Friday with their worst weekly performance since mid-2002, while Asian and European stocks dropped sharply on Monday, with investors unconvinced by Washington's proposed $150 billion (77 billion pound) fiscal stimulus package.

Japan's Nikkei was down 5 percent by 5:10 a.m. British time, having hit a two-year low. The index has shed around 17 percent this month alone as fears deepened that the U.S. subprime mortgage crisis will drag global financial markets lower.

South Korea's technology stocks, heavily dependent on the U.S. export market, were mauled, pushing the main stock index down more than 6 percent to its lowest since May. The Korea Exchange briefly halted programme selling orders on the main bourse to ease volatility.

Hong Kong blue chips spiralled lower, sliding 8 percent, with U.S. recession fears dragging bellwether bank HSBC Holdings to lows not seen since October 2003.

Hong Kong-listed shares in mainland companies sank 11 percent. The Hang Seng Index is down about 30 percent since a recent peak in late October and off 19 percent this year.

The president of China's sixth-largest bank, China Merchants Bank Co, told Reuters on Monday that earnings at Chinese banks will probably be hit this year by the snowballing U.S. subprime mortgage crisis and Beijing's moves to cool the economy.

"News like this suggests that damage may be spreading in developing markets including China, and this is worsening the overall sentiment in financial markets," said Toshiyuki Suzuki, a New York-based strategist at Mitsubishi UFJ Bank. "It appears that these markets, too, will not be able to escape the impact of the wave of worsening international economies."

Australia's S&P/ASX 200 index lost 7 percent in its biggest-ever one-day percentage drop to record its 12th straight session of declines.

Mining stocks, sensitive to any economic slowdown, led the decline. BHP Billiton fell 4.9 percent and Rio Tinto tumbled 11 percent.

Shanghai copper and zinc futures fell by their 4 percent daily limits.

Oil deepened losses as global stock markets tanked. London's Brent crude fell half a dollar to $87 a barrel by 5:20 a.m. British time.

"This is a meltdown. The weakness is spreading and there is nowhere to hide outside government bonds and, of course, cash," said MF Global analyst Edward Meir.

"But this could be the last big capitulation before prices steady -- this might a selling climax, but it could still last all week."