Stock markets across Asia tumbled this morning amid fears that the American economy is set to plunge further into a deep recession as the US car industry is left to collapse.

The Nikkei fell 2 per cent or 170 points, while Hong Kong's Hang Seng dropped 309 points, almost 3 per cent.

Australia's benchmark S&P/ASX 200 sank 3.84 percent, or 128.7 points to a five year low of 3224.2.

Wall Street panicked on Thursday evening after lawmakers on Capitol Hill stalled plans to bail out the American car industry. Their delay sparked fears that General Motors, Ford and Chrysler, may soon go bust without immediate federal help from Washington.

While car manufacturing only contributes $100 billion in corporate taxes to Washington, the industry employs 3 million jobs across the country at a time when 540,000 workers are becoming unemployed a week in the US.

Reacting to Wall Street's anxiety about the car industry, traders in the Far East were jittery with the Hang Seng dropping by as much as 483 points in early trading.

Minoru Shioiri, chief manager of foreign exchange trading at Mitsubishi UFJ Securities in Tokyo, said: "The market needs positive news on the future of U.S. automakers to make a decisive rebound, or there's little prospect that the current support for the yen will abate soon."

Japan relies heavily on American car consumption, with much of its sales derived from selling Toyota cars to American drivers.

At the same time, the world's biggest economies, which include the US, Japan and Britain, are bracing themselves for a severe and protracted recession as demand from America dries up.

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