Asian markets slump amid global fears for Italy

HONG KONG—Asian stock markets slumped on Thursday after Wall Street suffered a pummeling, with a surge in Italy’s borrowing costs fueling global anxiety about the future of the euro.

The common European currency fell to a one-month low, Hong Kong stocks slumped more than five percent and in Tokyo, the Nikkei ended down almost three percent.

“Just as everyone was beginning to see light at the end of the tunnel, the European crisis seems to have got worse overnight,” IG Markets analyst Stan Shamu said in Sydney, where stocks dived more than three percent.

Investors in Asia took succor on Wednesday from Italian Prime Minister Silvio Berlusconi’s vow to resign once credible economic reforms are in place by the end of the month.

But in Europe and the United States, markets took flight at the prospect of a long bout of political uncertainty in Italy to compound the deepening debt crisis in Greece, where leaders are bickering about a new government.

On Wall Street, the Dow Jones Industrial Average fell 3.20 percent. The broad-based S&P 500 lost 3.67 percent while the tech-heavy Nasdaq Composite tumbled 3.88 percent.

The euro briefly fell below $1.35 for the first time in a month – hitting $1.3495 – before rising back to $1.3520, against 1.3543 in New York late Wednesday.

The single currency also slipped to 105.12 yen from 105.38 yen in New York Wednesday.

The dollar stood at 77.63 yen, from 77.78 in New York Wednesday.

While Greece is struggling to meet strictures imposed by the European Union and International Monetary Fund for another bailout, Italy is seen as too big to rescue given its size as the eurozone’s third-largest economy.

Rome’s bond yields have now surged to a critical level above seven percent and the EU’s nascent bailout fund lacks the firepower to help. Other powers such as China and Japan are lukewarm about coming to Europe’s rescue.

The surge in Italian borrowing costs came at a sensitive time for the eurozone as “the details of the European Financial Stability Facility aren’t nailed down yet,” said Yumi Nishimura, senior market analyst at Daiwa Securities in Tokyo.

The Nikkei in Tokyo closed down 2.91 percent, or 254.64 points, at 8,500.80 and Sydney ended 2.35 percent, or 102 points, lower at 4,244.1.

The Hang Seng in Hong Kong slumped 5.25 percent, or 1,050.54, to 18,963.89 while Shanghai shed 1.80 percent, or 45.38 points, to 2,479.54.

Seoul dived 4.94 percent, or 94.28 points, to 1,813.25.

In early European trade most stocks extended their losses from Wednesday.

London’s FTSE 100 sank 0.69 percent, Frankfurt’s DAX 30 dived 0.41 percent and the Paris CAC 40 shed 0.36 percent.

However, Milan’s FTSE Mib gained three percent.

Selling pressure on the Tokyo bourse also increased after official data showed Japan’s machinery orders for September fell 8.2 percent from the previous month, worse than the market’s expectation for a 7.1 percent fall.

Olympus tumbled again after the camera maker’s belated admission to covering up losses since the 1990s. Its shares closed down more than 17 percent – extending the 20 percent loss on Wednesday and 29 percent dive on Tuesday.

Oil prices inched lower in Asian trade, hurt by fears that the eurozone’s debt crisis could cast a pall over global energy demand.

New York’s main contract, light sweet crude for December delivery, fell 15 cents to $95.59 a barrel in the afternoon.

Brent North Sea crude for delivery in December shed 15 cents to $112.16.

Italian debt yields jumped as high as 7.4 percent, levels that could make it impossible for Rome to keep servicing its huge borrowing, erasing any optimism seen on the markets earlier in the week. In early European trade Thursday the yield on a 10-year bond was at 7.07 percent.

“Risk assets were the biggest culprits of the uncertainty that has gripped global markets following the spike in Italian bond yields,” Shamu said in Sydney.

The Australian dollar was also hit hard, slumping more than two US cents. It was trading at 100.86 US cents, down from 103.62 on Wednesday.

Gold in Hong Kong traded at $1,769.50 an ounce around 0950 GMT, down from $1,783.30 late Wednesday.

In other markets:

— Singapore closed down 2.51 percent, or 71.76 points, at 2,786.90.

Wilmar International fell 3.55 percent to Sg$5.17 and Singapore Airlines shed 0.80 percent to Sg$11.11.

— Taipei tumbled 3.35 percent, or 253.18 points, to 7,308.68.

Leading smartphone maker HTC dived 3.05 percent to Tw$635.0 while Taiwan Semiconductor Manufacturing Co was 2.02 percent lower at Tw$72.6.

— Manila closed 1.41 percent, or 61.14 points, lower at 4,285.06.

SM Investments led decliners, falling 2.63 percent to 556 pesos, while San Miguel dropped 2.69 percent to 115.70 pesos.

Philippine Long Distance Telephone climbed 0.84 percent to 2,400 pesos.

— Wellington was down 1.03 percent, or 34.69 points, at 3,318.87.

Fletcher Building dipped 3.1 percent to NZ$6.28 but Telecom Corp. limited the market’s losses, edging up 0.2 percent to NZ$2.695.

— Kuala Lumpur fell 1.14 percent, or 16.99 points, to 1,472.65.

UEM Land Holdings lost 2.80 percent to 2.08 ringgit, while Petronas Chemicals Group shed 1.39 percent to 6.39. Oil palm planter Rimbunan Sawit gained 1.20 percent to 0.84 ringgit.

— Jakarta dropped 1.90 percent, or 73.48 points, to 3,783.88,

Car maker Astra ended down 2.3 percent at 69,150 rupiah and Bank Mandiri fell 3.4 percent to 7,150 rupiah.

— Bangkok closed flat, edging up 0.46 points to 968.30.

— Mumbai was closed for a public holiday.—Dow Jones Newswires contributed to this story