Asian stocks drop on renewed Europe fears

14:20, May 25, 2010      

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Asian stock markets tumbled Tuesday, extending Wall Street's sell-off as the sliding euro hit exporters amid a new wave of pessimism about the global economy's health.

Renewed worries about Europe's debt problems and a shaky euro rattled already anxious investors, who grew more uncertain about the outlook for the U.S. and global economies.

Japan's Nikkei 225 stock average shed 2.8 percent to 9,484.71 as the yen's strength against the common European currency hammered exporters.

Hong Kong's Hang Seng index fell 2.4 percent to 19,193.70 while benchmarks in Australia, Singapore and Indonesia all lost more than 2 percent. Stock markets in China, India, Thailand, Malaysia were down between 1 percent and 2 percent.

The weekend rescue of a small Spanish bank exacerbated investor pessimism about Europe's financial health. The Bank of Spain stepped in to rescue Cajasur after it failed to complete a merger. It was only the second time Spain's central bank had saved a regional lender.

The euro's weakness also unnerved markets. Traders have been dumping the 16-nation currency on fears that massive debts will cause defaults by weaker countries in the European Union.

South Korean financial markets fell sharply after reports that Pyongyang reportedly has ordered its military to be on combat alert amid rising tensions on the peninsula.

South Korea's benchmark stock index dropped 3.4 percent to 1,550.10 — its lowest level in six months. The South Korean won, meanwhile, slid to its weakest level against the dollar in more than 10 months, trading at 1,267.25 to the greenback.

"The main reason is the risk of war with North Korea," said Kim Joong-hyun, a strategist at Shinhan Investment Corp. in Seoul.

In New York on Monday, the Dow Jones fell 126.82, or 1.2 percent, to close at 10,066.57. The S&P 500 index fell 14.04, or 1.3 percent, to 1,073.65, and the Nasdaq composite index fell 15.49, or 0.7 percent, to 2,213.55. Crude oil for July delivery fell 99 cents to $69.22 a barrel on the New York Mercantile Exchange.

Source: Agencies


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