Asian stocks hit by fears over EU

Updated: 
A man strolls outside a securities firm in TokyoAsian stock markets fell 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 sees 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 do not 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. Tom Kaan of Hong Kong's Louis Capital Markets said: "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."
© 2011 Press Association

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