BEIJING — Signs of crisis rippled around the globe Thursday as fears that the ailing U.S. financial system would drag down the rest of the world ricocheted from trading floors in Singapore to the streets of Hong Kong and energy markets in Europe.
While markets gyrated, Russia's president made an unusual appeal for the United States to calm the global financial turmoil it had unleashed and oil-producing countries scrambled to cope with lower prices, indications that the crisis has the potential to reshape politics, as well as finance.
Around the globe, fear pervaded trading floors, leaving many traders dazed.
"People are shell-shocked," said Tim Condon, the Singapore-based chief Asia economist for ING Bank. "No one is doing very much. They're just sitting on the sidelines trying to preserve their cash.
Never miss a local story.
"The only question on people's lips is which institution will be next to fail."
The U.S. Federal Reserve and five other major central banks took unprecedented joint action to prop up world markets, injecting $180 billion in credit that stopped a wild fall in stocks in East Asia and stabilized markets in Europe.
Hong Kong's main Hang Seng Index fell 7.7 percent in the morning before closing virtually flat. Tokyo's Nikkei 225 Index ended down 2.2 percent, a three-year low. South Korea's Kospi lost 2.3 percent, and China's Shanghai index dipped 1.7 percent.
In Russia, the two major stock exchanges, Micex and RTS, were closed or kept at limited operation for three days starting Tuesday, when trading was suspended after shares had their biggest single-day loss in a decade. Since May, the RTS has dropped by more than 50 percent. The markets will reopen Friday, according to state news wires.
Polina Lazich, an analyst at a leading Russian investment firm, AK Bars Finance, was succinct in describing the situation: "Right now, Russia does not have a stock market to speak of. It simply doesn't exist."
For a third straight day, lines of panicked people formed outside the offices of global insurance giant American International Group or its subsidiaries in Hong Kong, Taipei and Singapore. Nervous policyholders weren't swayed by Washington's decision to lend $85 billion to AIG to forestall a global financial calamity and demanded to terminate their policies.
In China, the steady slide of the Shanghai stock market brought forecasts of political risk and fears that global demand for the country's manufactured goods may ebb, slowing China's growth.
"The crisis in the U.S. is a big red flag for China," said Guo Min, a finance expert at the University of International Business and Economics in Beijing.
A slowdown of consumer spending in the United States and other major markets already is affecting China's manufacturers, putting a crimp on the world's third-biggest economy and giving senior policymakers some jitters.
"The possibility of world exports coming down and hurting China a lot is keeping them awake at night," said Michael Pettis, a finance professor at Peking University's Guanghua School of Management.
Also unsettled are tens of millions of ordinary Chinese who've watched their stock portfolios wither. A steady slide this week capped by Thursday's decline to 1,802.33 left Shanghai's composite index an astounding 70.5 percent off its record high of 6,124 last Oct. 16.
"Chinese people blame the government for inaction on the stock market," Guo said.
The financial crisis already has taken a toll on global energy markets.
Anticipating less demand for crude oil in the United States and China, oil prices have fallen back below $100 a barrel, which could increase domestic tensions in oil-producing nations such as Nigeria, Iran and Venezuela, analysts said.
Some analysts think that even if oil stabilizes, the drop in crude prices could fuel instability in major Organization of Petroleum Exporting Countries members such as Iran, which is struggling with sanctions over its nuclear program and faces huge fuel-import bills, and Venezuela, which critics say has mismanaged its oil windfall under President Hugo Chavez.
"Venezuela and Iran are the two in OPEC under the most fiscal pressure," said Robert Johnston, an energy analyst in Washington for the Eurasia Group risk consultancy.
Lower fuel prices have reduced transportation costs in developing nations that rely on exporting commodities such as metals, tea and horticultural products. Prices for many of these commodities have stayed high in recent years, fueling strong growth in emerging economies in Africa and across the developing world.
Now, however, those countries fear the effects of a slowdown in their main export markets. Lower commodity prices could have ripple effects across Africa, as governments could be forced to cut investment in infrastructure and health and social programs.
In Kenya, where tourism and exports of tea, coffee and cut flowers to Europe have helped the economy grow at about 6 percent annually, commodity producers are worried that the United States, Europe and China suddenly will have less demand for their products.
Financial analysts said that in addition to lower oil prices, two factors squeezed Russian markets: the flight of billions of dollars in capital from Western investors made nervous by Russia's invasion of Georgia last month along with the global liquidity crunch.
Economists in Moscow have long worried that the country — the world's second-largest oil exporter and the leader in natural gas — was too dependent on natural resources and that it was only a matter of time before a sharp downturn.
Moscow took a series of rapid-fire steps Thursday designed to salvage the economy, as observers worried about a repeat of the 1998 financial collapse. The government made about $44 billion available to the nation's largest banks. President Dmitry Medvedev said that the government also should put aside about $20 billion to support the stock market.
"This is a global-scale crisis, and all the government can do now is to solve short-term problems," said Andrei Kuznetsov, a macroeconomic analyst with Troika Dialog, a top Russian investment firm. "It does exactly that by providing more liquidity to the financial sector to avoid its collapse."
The calamity sharply contradicted Kremlin leaders' comments during the past year that Russia was relatively insulated from Western markets.
In remarks Thursday at the Kremlin, Medvedev said, "We hope the administration of the United States will handle the grave financial turmoil, which is significantly affecting many countries." That implicit acknowledgement that Russia needed America's financial stability would have been unthinkable a few months ago.
(Bengali reported from Nairobi, Kenya, Lasseter from Kiev, Ukraine. McClatchy special correspondents Hua Li in Beijing and Alla Burakovskaya in Moscow contributed to this article.)
MORE FROM MCCLATCHY: