Asian stock markets fall over EU fears


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The Independent Online

Asian stock markets fell today as criticism by ratings agencies sparked scepticism about a historic European Union plan to fix a massive debt crisis by binding member economies closer together.

Benchmark oil hovered below 98 US dollars per barrel while the dollar fell against the euro and the yen.

Japan's Nikkei 225 fell 0.9% to 8,574.70. South Korea's Kospi gave up 1.4% to 1,872.47.

Meanwhile, Hong Kong's Hang Seng lost 0.9% to 18,413.52 and Australia's S&P/ASX 200 dropped 1.4% to 4,193.30.

Benchmarks in mainland China, Singapore, Taiwan and Indonesia also fell, but India, Malaysia and the Philippines rose.

Markets had jumped on Friday when all 17 countries that use the euro agreed to adopt a new fiscal pact meant to prevent a repeat of the financial fiasco that is sweeping Europe.

The pact see a central European authority oversee their future budgets and impose tighter controls on spending. They also agreed to automatic penalties if countries spend too much.

Other nations that are in the European Union but don't use the euro also indicated they would sign up, with one exception - the UK.

Optimism evaporated on Monday when credit rating agencies Moody's and Fitch both said the deal was insufficient and would not materially address the crushing debt loads of some nations or their rising borrowing costs.

Moody's warned that it will review all EU governments' ratings for possible downgrades in early 2012 - a threat that analysts said was particularly worrisome to France, a major contributor to the European Financial Stability Facility, Europe's emergency bailout fund.

A downgrade of France's triple-A rating could hurt its ability to fulfil its commitments to the fund.

"If France loses its triple-A rating, you will have a problem with the EFSF fund, the one that was supposed to be the 'bazooka' in order to buy up bonds issued by peripheral countries," said Tom Kaan of Louis Capital Markets in Hong Kong.

Mr Kaan said UK Prime Minister David Cameron's decision to reject the proposed EU treaty threw doubts about the plan's workability into the equation.

"The UK veto has basically thrown everything into a little bit of nervousness," he said. "At the end of the day, nothing came about."

Hi-tech shares slumped, tracking losses by industry bellwether Intel which fell 4% in New York after the chip-maker said its fourth quarter revenue will be lower than expected because flooding in Thailand has disrupted the supply of hard drives.

South Korea's Samsung Electronics lost 1.8% and Taiwan's Acer, a major personal computer maker, shed 0.9%.

Resource shares fell on tumbling commodities prices sparked by concerns about Europe's ability to resolve its financial problems and stave off what many economists believe is an impending recession.

Australian mining giants BHP Billiton and Rio Tinto fell 1.9% and 2.1% respectively. Hong Kong-listed Zijin Mining Group, China's largest gold miner, fell 2.1%.

Wall Street traded lower on Monday. The Dow closed down 1.3% at 12,021.39, a loss that erased nearly all the Dow's gains from last week. The S&P 500 lost 1.5% to close at 1,236.47. The Nasdaq composite index dropped 1.3% to 2,612.26.