Asia stocks fall after US does on banking fears

Asian stock markets tumbled Tuesday, with benchmarks in Tokyo and Hong Kong down 3 percent or more after news of mounting bad loans at Bank of America rekindled worries about the financial system and halted Wall Street’s six-week rally.

Selling spread across the region, with shares in financials, exporters and commodity firms all suffering sharp losses as investors clamored to sell following an enormous run-up in global equities since early March. Oil prices were little changed after plummeting overnight, while the dollar gained slightly against the yen.

Investors reverted to worrying about the banking industry again after Bank of America, while posting a profit in the first quarter, said it was setting aside $13.4 billion to cover losses from souring loans.

The news raised the specter of more colossal write-downs as defaults climb and left many questioning the quality of better-than-expected earnings from other major banks that had cheered Wall Street just a week ago.There was also growing anxiety the results of the government’s “stress tests” will show many banks are still in dire straits and may need more government bailout money.

Investors have plunged headlong into the market recently amid speculation the recession will end sooner than originally thought.

But well-known U.S. economist Nouriel Roubini, who foresaw the current crisis, was skeptical. He said the results of the government’s bank stress tests, along with further decay in the U.S. economy and surprisingly bad corporate earnings this year, will lead to more steep selling in the coming months.

“For people who say there are green shoots, I seen only yellow weeds frankly,” Roubini said at a conference in Hong Kong Tuesday. “It’s not a true recovery. It’s just a bear-market rally. It’s a suckers rally.”