Shares, bonds and the U.S. dollar regained some composure on Tuesday as it appeared likely the fiery crash of an American Airlines passenger jet in a residential area of New York City was an accident and not a fresh attack upon the United States.
But airline stocks reeled as investors feared the disaster would deal a further devastating blow to public confidence in air travel, coming only two months after the hijacked-plane assaults on New York and Washington killed an estimated 4,600 people.
Insurance and travel industry shares were pummeled too.
"The recovery of U.S. stocks is helping the market here," said Ben Kwong, a director at brokers KGI Asia Ltd in Hong Kong. "But the crash is creating some consolidation pressure as people are concerned it might affect consumer sentiment in the U.S. as it came close to the Thanksgiving and Christmas holidays."
Immediately after the crash of the plane, bound for Santo Domingo in the Dominican Republic, U.S. stocks and the dollar slumped as investors fled to safe haven investments such as gold.
But the Nasdaq composite moved into positive territory and the dollar ended mostly flat in New York as a U.S. National Transportation Safety Board ( news - web sites ) official said all information currently available suggested the tragedy that killed up to 269 people aboard the plane and on the ground was an accident.
The crash threatened to further unnerve consumers and put off a long-awaited recovery despite 10 Federal Reserve ( news - web sites ) interest rate cuts this year and higher government spending.
Gold eased off highs reached in New York in the wake of the crash and crude oil prices stayed weak despite expectations that OPEC ( news - web sites ) was about to reduce its output for the fourth time this year at its meeting on Wednesday.
Airline stocks across Asia were hit on Tuesday as the New York crash fueled fears that demand for air travel would slow further in an environment already severely affected by the September attacks on the United States.
Japan Airlines Co Ltd (JAL) dropped 2.69 percent to 289 yen in Tokyo and Cathay Pacific Airways lost as much as 3.7 percent to HK$7.80 at one point before rallying.
In Sydney, QBE Insurance Group Ltd shares lost ground as investors fretted over the fresh threat to the sector's solvency, despite the company's attempt to soothe the market on its exposure to the latest New York City tragedy.
The Japanese market, Asia's largest by capitalization, fell below the 10,000 mark as measured by the Nikkei average by midday, with the New York crash causing early jitters and bank stocks continuing their descent on concerns over bad loans.
The Nikkei average fell as much as 1.2 percent to 9,958.90, breaching 10,000 for the first time since October 10, before bouncing back just above 10,000.
Hong Kong's Hang Seng was down 0.55 percent, or 58.28 points, at 10,534.17 by 11:13 p.m. EST.
The U.S. dollar held firm in Tokyo and was bid up to 120.83 compared with 120.34 in late New York. The greenback was also stronger too against European currencies.
In Tokyo, U.S. Treasuries were firmer, but traders said this was not so much to do with safe-haven flows. It was more to do with the fact that the crash would still be a blow to consumer confidence and the economy, which would support expectations for yet another Fed rate cut.
Gold was fetching US$278.45/278.95 an ounce in Asia trading, compared with a London afternoon fix of $280.
Overnight in New York, technology stocks bounced with the Nasdaq composite ending 0.64 percent higher at 1,840.13 points. But the Dow Jones industrial average closed off 0.6 percent at 9,554.37, dragged down by airline-related stocks like General Electric Co, manufacturer of the crashed plane's engines. GE closed down 2.43 percent at $39.43.
In Europe, the FTSE Eurotop 300 index -- off more than 3 percent immediately after the crash -- closed down 2.2 percent.