Asia stocks down after Spain asks for bank bailout

BANGKOK (AP) ? Asian stock markets fell Tuesday, a day after Spain formally requested help to rescue its ailing banks and investors lost hope that an upcoming summit of European leaders would yield meaningful results.

Investors already worried about an economic slowdown in the U.S. and China were preparing for the European leaders to disappoint at their June 28-29 gathering in Brussels.

"Another day, another bout of global jitters about the state of the European Union. Overnight we saw equities on both sides of the Atlantic sold off heavily," Cameron Peacock of IG Markets in Melbourne said in a market commentary.

Japan's Nikkei 225 index fell 0.9 percent to 8,657.90 and South Korea's Kospi was 0.3 percent lower at 1,820.12. Australia's S&P/ASX 200 lost 0.5 percent to 4,008.10. Hong Kong's Hang Seng Index was nearly unchanged at 18,896.45.

Benchmarks in Singapore, Taiwan and mainland China fell. The Philippines and Indonesia rose.

Among the most pressing issues at the EU summit will be how to ease some of Greece's austerity terms now that it has elected a government in favor of its international bailout. Officials in both Athens and Brussels say the current deficit reduction targets are unrealistic. But giving Greece more time to make budget cuts could mean giving it more money to finance its debt. Several European countries are reluctant to do that.

Anxiety over Spain escalated Monday, when the country formally asked other euro countries for rescue loans for its banks, which are reeling from the collapse of the country's real estate sector.

The amount and terms will be agreed on July 9. Two international audits have estimated that Spain's banks could need up to ?62 billion ($77.7 billion).

Meanwhile, credit ratings agency Fitch on Monday downgraded Cyprus to "junk" status, prompted by the amount of rescue money that would be needed to bail out its banks which are heavily exposed to the troubled Greek economy. The country's benchmark stock index slumped 7.2 percent to 145.76 points on the downgrade.

The unanswered questions surrounding Spain and Greece made for a high-risk environment that left little appetite for aggressive investing in stocks, analysts said.

"The volumes are low, I think, because the market generally trades rationally and institutional and longer-term investors won't go into the market at the moment because the clarity or visibility three to six months from now is very low," said Benjamin Collett, head of Japanese equities at Louis Capital Markets in Hong Kong.

Japanese exporters, which are vulnerable to economic turbulence in Europe, slumped. Yamaha Motor Co. tumbled 4.4 percent and Sharp. Corp. fell 3.9 percent. Sony Corp. lost 3.4 percent.

Steelmakers across Asia also fell. South Korea's POSCO shed 2.2 percent and Japan's Nippon Steel Corp. dropped 2.8 percent.

Stocks on Wall Street were rattled Monday by Spain's request for a loan for its banks. The Dow Jones industrial average fell 1.1 percent to close at 12,502.66. The Standard & Poor's 500 index fell 1.6 percent to 1,313.72. The Nasdaq composite fell 1.9 percent to 2,836.16.

Benchmark crude was down 30 cents to $78.91 in electronic trading on the New York Mercantile Exchange. The contract fell 55 cents to close at $79.21 in New York on Monday.

In currencies, the euro rose to $1.2502 from $1.2495 late Monday in New York. The dollar fell to 79.52 yen from 79.68 yen.

Associated Press

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