Asia stocks fall after S&P warns euro nations

BANGKOK — Asian stock markets fell Tuesday after Standard and Poor’s warned 15 countries using the euro currency that their credit ratings are at risk of a downgrade.
Japan’s Nikkei 225 dropped 0.8 percent to 8,628.73. South Korea’s Kospi dipped 0.7 percent to 1,908.75 and Hong Kong’s Hang Seng lost 1 percent to 18,988.82. Australia’s S&P/ASX 200 shed 0.6 percent to 4,293.90. Benchmarks in Singapore, Taiwan and New Zealand also gave up ground.

The S&P announcement came only hours after French President Nicolas Sarkozy and German Chancellor Angela Merkel on Monday unveiled sweeping plans to change the European Union treaty in an effort to keep tighter checks on overspending nations.

The S&P warning left out only two of 17 countries that use the euro: Cyprus, whose bonds have near-junk status, and Greece, which already has ratings low enough to suggest that it’s likely to default soon anyway. The inclusion on the list of Germany, Europe’s strongest economy, was the biggest surprise.

The Franco-German plan, which would tie the 17 euro nations closer together, would likely also result in heavier financial burdens for Germany and other stronger economies that have already put up billions of euros to rescue Greece, Ireland and Portugal.

Sarkozy and Merkel discussed several broad changes for the EU treaty, including the introduction of a penalty for any government that allows its deficit to exceed 3 percent of gross domestic product. The penalty would be automatic — unless a majority of nations opposed it, a loophole that drew sharp criticism from analysts.

Andrew Sullivan, principal sales trader at Piper Jaffray in Hong Kong, said the sanctions were “subject to political control” and in reality represent no change from mechanisms already in existence.

The French-German proposal will be taken up at a summit of EU leaders on Thursday and Friday aimed at fixing a debt crisis so severe that it threatens the viability of the euro currency.

On Wall Street, the Dow Jones industrial average rose 0.7 percent to 12,097.83. The S&P 500 rose 1 percent to 1,257.1. The Nasdaq added 1.1 percent to 2,655.76.