Asian stock markets plummeted today after investors took fright at plunging US shares after a record number of foreclosures on American houses.

Hong Kong’s Hang Seng index closed down 841.40 points, or 3.6 per cent, at 22,501.33. In Japan, the Nikkei 225 slumped by 432.32 points to close 3.27 per cent down at 12,782.80 – its lowest finish in more than six weeks.

Over the past five days, the Nikkei has fallen by 6 per cent, its lowest weekly close since August 17 last year when the prospect of a global credit crunch began to emerge from Europe and the US.

Asian stocks were also hit by an announcement from the Bank of Japan that it expects the Japanese economy to slow this year, on the back of higher energy and raw material costs, as well as growing fears that the US is falling into recession. In London, the FTSE 100 index of leading shares opened 62.9 points lower at 5,702.1.

Later today, the US will release non-farm payroll figures - the key measure of US employment - which is forecast to show 25,000 new jobs created in February.

However, there are fears the figures will show that US unemployment reached a two-year high last month, which could send US shares tumbling again and weaken the dollar further.

The dollar is already trading at a record low against the euro, falling to $1.5430 in its fourth weekly decline, and could soften more if the jobless figures match or exceed investors’ worst fears. The greenback is also still trading at more than $2 against sterling.

Last night, the US Federal Reserve revealed that Americans' debt on their homes during the fourth quarter of 2007 exceeded their equity for the first time since 1945. In response, the Dow Jones industrial average lost 214.60 points, ending the day down 1.75 per cent to 12,040.39.

Concern grew that more lenders could follow in the footsteps of Thornburg, the American mortgage group which failed to find $28 million (£13.9 million) when banks demanded extra collateral.

There are renewed expectations that the Federal Reserve will cut the borrowing rate by 0.75 per cent to stave off a full-blown slowdown.

The European Central Bank and the Bank of England both opted to keep their interest rates unchanged yesterday.

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