(MENAFN - AFP) Fears the US is facing another huge economic crisis spurred a sell-off in Asian markets Thursday as Barack Obama's re-election raised the spectre of another bitter stand-off in Washington.
Investors fear a deeply divided Congress will not be able to reach an agreement to avoid a so-called fiscal cliff at the end of the year that many say will send the United States back into recession.
Eyes are also on Beijing, where the Communist Party has kicked off its 18th congress, which will see the beginning of a once-in-a-decade leadership change.
Tokyo tumbled 1.51 percent, or 135.74 points, to 8,837.15, Sydney fell 0.72 percent, or 32.7 points, to close at 4,483.8 and Seoul lost 1.33 percent, shedding 25.83 points to 1,911.09.
Hong Kong skidded 2.41 percent, or 532.94 points, to 21,566.91 and Shanghai fell 1.63 percent, or 34.22 points, to 2,071.51.
The initial upbeat reaction Wednesday to Obama's victory over Republican Mitt Romney was replaced Thursday with trepidation as the focus turned to the fiscal cliff, a combination of deep spending cuts and huge tax hikes to take effect on January 1.
The package is a major threat to the economy after a protracted but possibly reckless compromise was agreed last year between Democrats and Republicans in order to raise the country's borrowing cap.
If it kicks in, the United States' slow recovery from the financial crisis could be reversed and the economy tip back into recession, which would in turn deal a major blow to the global economy.
And with Democrats holding the Senate while the Republicans hold the House of Representatives analysts say a compromise could be as tough to find as last August, when the row over the spending limit saw the country lose its AAA sovereign debt rating.
"Immediately after the re-election parties ended, markets returned to the daunting issue of the US 'fiscal cliff'," Nicholas Smith, Japan strategist for CLSA in Tokyo, told Dow Jones Newswires.
Wall Street, which had favoured a pro-business Romney win, tumbled on Obama's victory.
The Dow dived 2.36 percent, the Nasdaq shed 2.48 percent and the S&P 500 lost 2.37 percent.
Currency markets also reacted negatively. The dollar fell to 79.90 yen in early European trade, from 79.96 yen in New York late Wednesday, as investors moved to the safe Japanese unit owing to economic uncertainty.
And the euro was also down. The single currency, which rose against the dollar Wednesday on expectations of continued loose US monetary policy under Obama, fetched 1.2760, compared with 1.2767 in New York. It had reached 1.2860 on Wednesday in Asia.
The European currency also fell to 102.00 yen, compared with 102.09 yen.
Market sentiment was also pressured after the European Union slashed its eurozone economic forecast and European Central Bank chief Mario Draghi warned that the eurozone's woes were beginning to hurt Germany, the bloc's powerhouse.
However, Greek lawmakers did manage to pass a crucial austerity package that opens the way for it to qualify for a fresh batch of bailout cash.
In China the week-long congress is expected to see the anointment of the country's next leaders, with the focus on the composition of the Communist Party's top governing body for signs of future policy direction.
In a speech to open the event President Hu Jintao called for the country's future leadership to "speed up the creation of a new growth model and ensure that development is based on improved quality and performance".
Oil prices rose, with New York's main contract, light sweet crude for delivery in December, adding 61 cents to 85.05 a barrel in the afternoon and Brent North Sea crude for December gaining 51 cents to 107.33.
Gold was at 1,714.90 by 1030 GMT compared with 1,729.40 Wednesday.
In other markets:
-- Singapore slid 1.02 percent, or 31.02 points to 3,012.25.
City Developments sank 1.61 percent to Sg11.64 and Jardine Cycle and Carriage fell 0.71 percent to Sg47.36.
-- Taipei fell 0.61 percent, or 44.55 points, to 7,242.63.
Taiwan Semiconductor Manufacturing Co. was 0.55 percent lower at Tw90.5 while leading smartphone maker HTC added 1.44 percent to Tw211.5.
-- Manila rose 0.17 percent, or 9.42 points, to 5,446.71.
-- Wellington added 0.31 percent, or 12.15 points, to 3,955.25.
Fletcher Building was up 1.24 percent at NZ7.34 and Contact Energy rose 1.52 percent to NZ5.36 while Telecom was steady at NZ2.38.
-- Kuala Lumpur shares ended down 0.27 percent, or 4.46 points, at 1,641.07.
Sime Darby lost 0.2 percent to 9.73 ringgit, IOI Corp fell 0.8 percent to 5.01 while Axiata rose 1.4 percent to 5.91.
-- Jakarta fell 0.52 percent, or 22.56 points, to 4,327.87.
Coal firm Indo Tambangraya slipped 1.9 percent to 41,150 rupiah and nickel company Vale Indonesia was down 1.9 percent at 2,600 rupiah.
-- Bangkok shed 0.46 percent, or 6.04 points, to 1,293.70.
Bangkok Bank dropped 0.85 percent to 174.50 baht, while Siam Cement lost 0.78 percent to 384 baht.
-- Mumbai fell 0.30 percent or 56.15 points at 18,846.26 points.
Private Tata Power fell 2.12 percent to 101.65 rupees while engineering giant Larsen and Toubro slid 2.04 percent to 1,634.4 rupees.
