WHAT THE HECK IS GOING ON WITH BEAR STEARN ?

SEOUL, South Korea - Asian stocks plunged and the dollar sank Monday after JPMorgan Chase said it would acquire troubled U.S. investment bank Bear Stearns, signaling to investors the depths of the credit crisis.

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Oil prices hit a record in Asian trading and U.S. stock index futures were down sharply, suggesting Wall Street would open lower later Monday.

JPMorgan said Sunday it would acquire Bear Stearns for $236.2 million — or $2 a share — in a deal that represents a stunning collapse for one of the world's largest and most venerable investment banks.

The buyout was aimed at averting a bankruptcy and a spreading crisis of confidence in the global financial system.

But to Asian investors the move suggested that the credit problems, triggered by defaults on risky U.S. mortgages, are far from over — and fanned worries that other big American banks could face serious troubles.

"There is persistent credit uncertainty. Market players have been repeatedly let down which shows the subprime mortgage problems are so deep-rooted," said Atsuji Ohara, global strategist of Shinko Securities in Tokyo.

"Just buying an investment bank does not solve the problem," he said. "Markets are prodding (the U.S. government) to inject public funds."

News of the acquisition of Bear Stearns stunned investors just before markets opened in Tokyo and Seoul.

Japan's benchmark 225 index sank 4.5 percent in early afternoon trading to 11,691.00 points, its lowest since July 2005. Hong Kong's Hang Seng index plunged as much as 5.4 percent before trimming some losses to trade at 21,304.38, down 4.2 percent.

Across Asia, all major stock indexes were down, including markets in Australia, China, Indonesia and South Korea.

"We are worried" about what comes next, Shim Jae-youb, a strategist at Meritz Securities in Seoul, said of concerns that other banks may face collapse.

He said investors were on guard ahead of the release of quarterly earnings reports from big U.S. investment banks this week, including Lehman Brothers Holdings Inc., Goldman Sachs Group Inc., and Morgan Stanley. Bear Stearns had been scheduled to report its results Monday, though it wasn't clear if it would go ahead with that plan.

In an extraordinarily rare weekend move, the Federal Reserve took bold action Sunday evening by cutting the discount rate, its lending rate to financial institutions, to 3.25 percent from 3.5 percent, effective immediately. The Fed also created another lending facility for big investment banks to secure short-term loans that would be available to big Wall Street firms on Monday.

The Fed was also widely expected to again cut its headline interest rate by as much as a full percentage point to 2 percent at a regular meeting set for Tuesday.

In currency trading, the dollar plunged to 95.72 yen — its lowest since August 1995 — driven down by a gloomy outlook for the American economy and prospects for lower interest rates. The euro rose to $1.5839.

Oil prices, meanwhile, hit an all-time trading high in Asia as the greenback's tumble and decline in stock markets prompted investors to seek shelter in commodities such as crude oil. Light, sweet crude for April delivery spiked to a record $111.42 a barrel in electronic trading on the New York Mercantile Exchange.

On Friday, U.S. stocks sank after the announcement of a Fed plan in conjunction with JPMorgan to alleviate the liquidity crisis at Bear Stearns touched off concerns about the severity of credit troubles in the world's largest economy. The Dow Jones industrial average fell 194.65, or 1.60 percent, to 11,951.09.

Wall Street appeared poised for another drop when trading resumed Monday morning. Dow index futures were down 232 points, or 1.9 percent, to 11,750, while the Standard & Poor's 500 index was down 21.7 points or 1.65 percent, to 1,291.6.

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Associated Press writers Chisaki Watanabe in Tokyo, Gillian Wong in Singapore and Anthony Deutsch in Jakarta contributed to this report.