Asia stocks fall as Spain woes intensify

By PAMELA SAMPSON,AP Business Writer Updated at 2012-05-30 08:01:28 +0000


BANGKOK (AP) — Investors unnerved by Spain's worsening financial condition and a report that China has no plans for a major economic stimulus dragged Asian stock markets lower Wednesday.

Worries about Europe's financial stability worsened after a ratings agency slapped Spain with a downgrade Tuesday because it may have trouble repaying its debt amid slowing growth and rising unemployment. Spain has a 24.4 percent jobless rate and is battling its second recession in three years.

Traders are also concerned that Europe's fifth-largest economy may struggle to save its banking sector, worsening the region's chronic debt crisis. Jitters have worsened since Friday, when Bankia, Spain's fourth-largest lender, said it needed €19 billion ($23.8 billion) in state aid.

Markets also reacted to a microblog posting by China's official Xinhua News Agency that said Tuesday the government had denied reports it planned a massive new stimulus. However, that report was later deleted and no other Chinese media outlets carried it. Chinese leaders have recently indicated their intention to implement limited measures to help rev up the economy.

Japan's Nikkei 225 index fell 1 percent to 8,571.90 and Hong Kong's Hang Seng tumbled 2.1 percent to 18,642.37.

South Korea's Kospi was down 0.9 percent to 1,833.09. Australia's S&P/ASX 200 lost 0.9 percent to 4,076.40 and benchmarks in mainland China, Taiwan and Singapore also fell.

Spain's woes have magnified fears of a possible debt implosion in Europe's weaker economies — starting with Greece, which will run out of money in the coming days without an emergency loan.

Negative sentiment persisted despite polls that suggested an upcoming election in Greece might result in a government willing to implement a highly unpopular austerity program.

Sticking to its austerity commitments will enable Greece to qualify for an urgently needed international bailout to avoid defaulting on its massive debts and remain in the euro currency union.

"Spain remains the key worry for the Eurozone debt crisis, eclipsing optimism in Greece that the pro-bailout conservatives are leading the polls ahead of next month's election," said analysts at DBS Bank Ltd. in Singapore.

There was also bad news from the U.S. on Tuesday. The Conference Board, a private research group, said that its Consumer Confidence Index fell to 64.9 from 68.7 in April.

Wall Street, reopening after a three-day holiday, posted gains. The Dow Jones industrial average rose 1 percent to 12,580.69. The Standard & Poor's 500 index rose 1.1 percent to 1,332.42. The Nasdaq composite index rose 1.2 percent to 2,870.99.

Benchmark oil for July delivery was down 39 cents to $90.37 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 10 cents to settle at $90.76 in New York on Monday.

In currencies, the euro fell to $1.2463 from $1.2487 late Tuesday in New York. The dollar slipped to 79.48 yen from 79.51 yen.