U.S. & World

TOKYO (CBS News) ― Asian stock markets tumbled Tuesday amid growing fears of a global financial crisis as investors reacted to the demise of two of Wall Street's biggest names, Lehman Brothers and Merrill Lynch.

Japan's benchmark Nikkei 225 index was down 5.3 percent to 11,560.66 in mid-afternoon trading, while Hong Kong's blue-chip Hang Seng Index shed 5.7 percent. Both markets - Asia's two biggest - had been closed for holidays on Monday, when news first broke about the dramatic events on Wall Street.

Across the region, markets were all deep in the red. South Korea's Kospi was down 5.4 percent, Taiwan's benchmark was off 4.7 percent and China's Shanghai index was down 3.2 percent.

Japan's central bank on Tuesday injected 2.5 trillion yen ($24 billion) into money markets and issued a statement vowing to take measures to maintain stability in the country's financial markets. Cabinet ministers, along with the central bank chief, were also holding an emergency meeting.

"The Bank of Japan will carefully monitor recent situations surrounding the U.S. financial institutions and their influences, and will continue to strive to ensure smooth settlement of funds and maintain stability in financial markets through measures such as appropriate money market operations," central bank Gov. Masaaki Shirakawa said.

The dollar also got hit, falling to 104.43 yen early Tuesday afternoon in Asia from mid-107 yen levels before the weekend.

In Tokyo, the Japanese unit of Lehman Brothers Holdings Inc. requested bankruptcy protection at a Tokyo court after the 158-year-old firm filed for Chapter 11 bankruptcy in New York on Monday.

The storied New York investment bank, crippled by $60 billion in soured real-estate holdings, was unable to find an investment partner to throw it a lifeline despite a flurry of last-minute negotiations over the weekend.

Investors were further shaken by the equally stunning news that Merrill Lynch, one of the world's most famous brokerages, sought to avoid a similar fate with a $50 billion transaction to become part of Bank of America Corp.

The crisis appeared to be far from over. American Insurance Group, the world's largest insurer, was fighting for its survival after downgrades from major credit rating firms, adding pressure to AIG as it seeks billions of dollars to strengthen its balance sheet.

David Buik, a market analyst with BGC Partners in London, told CBS News that the finance industry likely has some more house cleaning to do before investors decide the coast is clear.

"The economy in the U.S. or in Europe, or the U.K. simply cannot recover until such time that the banks are in a position to say they've emptied all the skeletons out of the cupboards... they've written down bad debts, they've shored up their balance sheets with fresh capital, and we're open for business as usual," said Buik. "Until that happens, you going to find a very nervous market."

On Wall Street Monday, the Dow Jones industrial average fell more than 500 points, or 4.4 percent, to 10,917.51 - its worst point drop since after the September 11, 2001, terror attacks.

European markets also sank Monday, with Britain's FTSE-100 share index falling 3.9 percent and France's CAC-40 down 3.7 percent.

Terms like 'panic' and 'turmoil' were being used by traders to describe the effects of the post Lehman Brothers shock wave as it smacked into overseas markets, reported CBS News correspondent Mark Phillips.

The collapse of the U.S. giant may have pushed all the global exchanges down, but bank stocks were punished particularly hard, said Phillips, who added that another phrase making the rounds Monday was that financial institutions were experiencing "a crisis of confidence that could be catastrophic."

Share prices in Tokyo fell across the board, with banking issues taking a noticeably harsher hit in the wake of Lehman's collapse. Investors unloaded shares in major Japanese banks listed as some of the biggest lenders, including Aozora Bank, Mizuho Financial Group and Shinsei Bank.

Aozora, a midsize Tokyo-based bank, lost more than 19 percent, even as the company in a statement sought to reassure markets that its net exposure could be reduced to less than $25 million compared with the widely reported figure of $463 million.

Mizuho Financial Group, Inc., with a $289 million loan to Lehman, fell more than 10 percent. Shinsei was down almost 16 percent.

Australia's banks, including Commonwealth Bank of Australia, ANZ Banking Group and National Australia Bank Ltd., were all hit hard.

In Seoul, South Korean banks extended losses. Top lender Kookmin Bank shares declined 8 percent while Hana Financial Group shares fell 10 percent.

In Hong Kong, major bank HSBC lost 4.4 percent, and leading mainland Chinese lender ICBC plummeted 7.7 percent.

Hong Kong government officials said they were keeping a close eye on the markets.

"We know Hong Kong has a good monitoring system in place. I believe all monitoring agencies will make sure trading is conducted smoothly today," said Chan Ka-keung, secretary for financial services and treasury.

(© 2009 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)