Asian markets reverse rally on new European fears

A man walks by the electronic stock board of a securities firm in Tokyo on Tuesday, Jan. 22, 2013. AP FILE PHOTO

Hong Kong—Asian markets tumbled on Tuesday, bringing a recent rally to a juddering halt, as Wall Street and European shares were hit by political concerns in Spain and Italy.

The euro also slumped as Spain’s prime minister was forced to deny corruption claims, while former Italian premier Silvio Berlusconi vowed to throw a spanner in the works of a government austerity drive ahead of a general election.

Tokyo shares lost 0.94 percent, Hong Kong tumbled 1.54 percent, Sydney shed 0.70 percent, Shanghai was 0.39 percent off and Seoul slipped 0.88 percent in morning trade.

The losses come after several markets approached highs not seen for several months as confidence slowly returns, thanks to an easing of the eurozone debt crisis and a pick-up in the US and Chinese economies.

However, dealers suffered a blow Monday when Spanish Prime Minister Mariano Rajoy came under pressure to step down as he becomes engulfed in a corruption scandal.

Rajoy has dismissed claims by Spain’s El Pais newspaper that he and other ruling party officials channelled donations into secret payments.

The news sent the Spanish cost of borrowing surging, reviving worries about Madrid’s ability to access the debt market to keep functioning.

Berlusconi meanwhile said he would refund the money Italians have had to pay for an unpopular property tax if his coalition, headed by his protege Angelino Alfano, wins a February 24 to 25 election.

Recent polls have shown his party making solid gains.

Berlusconi, who would take the role of finance minister in a new government, abolished the real estate tax in 2008 but it was reinstated last year as part of Prime Minister Mario Monti’s austerity budget in Italy.

The news out of Europe hit the euro, which tumbled in New York late Monday to $1.3503 and 124.28 yen, from $1.3626 and 126.26 yen earlier in the day in Asia.

In Tuesday morning forex trade in Tokyo the euro fetched $1.3500 and 124.77 yen.

The dollar bought 92.28 yen compared with 92.11 yen in New York late Monday.

On Wall Street the Dow, which ended near a record high on Friday, dropped 0.93 percent Monday, while the S&P 500 fell 1.15 percent and the Nasdaq slipped 1.51 percent.

Oil prices eased. New York’s main contract, light sweet crude for delivery in March, dropped nine cents to $96.08 a barrel and Brent North Sea crude for March delivery shed 18 cents to $115.42.

Gold was at $1,673.90 at 0200 GMT compared with $1,665.40 late Monday.