Tomoko A. Hosaka, THE ASSOCIATED PRESS

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TOKYO - Gloom returned to Asian markets Tuesday as investors dumped stocks following huge overnight losses on Wall Street and dismal economic data out of the U.S., a crucial export market.

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THE ASSOCIATED PRESS/Katsumi Kasahara

Japanese men make their way past an electric market board in central Tokyo.

Japan's Nikkei 225 stock average tumbled 533.53 points, or 6.4 per cent, to 7,863.69, and Hong Kong's Hang Seng index lost five per cent to 13,401.73.

Global markets had rallied last week, but any nascent investor confidence quickly wilted after grim U.S. economic data sent the Dow Jones industrial average plummeting nearly 700 points - or 7.7 per cent - Monday, wiping out more than half of last week's big gains.

"A string of weak economic data really depressed sentiment," said Yutaka Miura, a senior strategist at Shinko Securities in Tokyo. "Investors are becoming more pessimistic over the state of the global economy."

Australia's central bank slashed its key interest rate Monday a full percentage point to 4.25 per cent as it tries to prevent the economy from sliding into recession. But investors took scant comfort from the move, and the benchmark S&P/ASX 200 index fell 4.2 per cent at 3,528.2.

While markets in mainland China and Singapore edged up, key indices in the Philippines, Taiwan, India and South Korea dropped sharply.

"This was brought by the confirmation of recession in the U.S.," said Emmanuel Soller, a trader at Equitiworld Securities Inc. in Manila.

U.S. stocks first slid on initial reports that the first weekend of the holiday shopping season, while better than some retailers and analysts feared, saw only modest gains. Downbeat reports on the manufacturing sector and construction spending further unnerved investors.

Then the National Bureau of Economic Research, considered the arbiter of when the economy is in recession or expanding, said the U.S. recession had begun a year ago, in December 2007. By one benchmark, a recession occurs whenever the gross domestic product, the total output of goods and services, declines for two consecutive quarters. But the NBER's dating committee uses broader and more precise measures, including employment data.

The problems facing the U.S. manufacturing sector were reflected in similar surveys earlier for the euro-zone and Britain. European shares also fell sharply Monday.

Japanese exporters have been hurting from the yen's renewed appreciation, which erodes their overseas earnings. The dollar was trading at 93.15 yen from 93.18 late Monday. The euro stood at $1.2608 from $1.2597.

U.S. stock index futures were up modestly, suggesting Wall Street would bounce back Tuesday. Dow futures were up 33 points, or 0.4 per cent, to 8,172, while S&P 500 futures were up 2.3 points, or 0.3 per cent, to 818.1.

The bleak outlook for the U.S. economy drove oil prices fell below $48 a barrel in Asian electronic trading. Light, sweet crude for January delivery was down $1.53 to $47.75 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore.