Asian markets, euro hit by Spain fears

Traders watch the monitor at a money brokerage in Tokyo. Asian markets fell for a second day Thursday, May 31, 2012, as Spain's banking crisis threatened to spin out of control and force Madrid into a financial rescue. AP PHOTO/SHIZUO KAMBAYASHI

HONG KONG—Asian markets fell for a second day and the euro sank to new lows Thursday as Spain’s banking crisis threatened to spin out of control and force Madrid into a financial rescue.

The heavy losses followed a sell-off on Wall Street and in Europe, while Spanish bond yields sat at dangerous highs.

Tokyo fell 1.05 percent, or 90.46 points, to 8,542.73, and Sydney shed 0.44 percent, or 17.9 points, to 4,076.3. Seoul was flat, losing 1.39 points to close at 1,843.47.

Hong Kong shed 0.32 percent, or 60.70 points, lower at 18,629.52, while Shanghai fell 0.52 percent, or 12.44 points, to 2,372.23.

Spain has moved into focus as it struggles with a banking crisis while battling record unemployment, a huge public deficit and a recession, raising concerns of a financial collapse.

The interest rate on its benchmark 10-year bonds surged to 6.703 percent Wednesday, which is considered unsustainable and around the levels seen in Ireland, Greece and Portugal ahead of their bailout.

The difference between yields on Spanish bonds and rock-solid German debt is now 5.41 percentage points, a euro-era record.

And while borrowing costs soar, Prime Minister Mariano Rajoy’s government has been asked by lender Bankia for 19 billion euros ($23.5 billion) in capital.

“Uncertainty is persistently strong over Spain’s situation (and) markets are very susceptible to worrisome developments,” said Yoshihiro Okumura, general manager of research at Chibagin Asset Management.

On currency markets the euro fell to $1.2360 in Tokyo morning trade – a new 22-month low.

But in early European trade it clawed back to hit $1.2410, compared with $1.2366 in New York late Wednesday.

It was also worth 98.85 yen, from 97.76 yen. The unit has not fallen below the 97-yen level since 2000.

The dollar weakened to 78.85 yen from 79.06 yen.

Asia’s sell-off followed big losses on Wall Street where the Dow sank 1.28 percent, the S&P 500 lost 1.43 percent and the Nasdaq dropped 1.17 percent.

There were also huge falls in Europe, with Madrid’s IBEX 35 index plunging to a nine-year low. However, European shares edged slightly higher in early trade Thursday.

Oil was higher Thursday. New York’s main contract, West Texas Intermediate crude for delivery in July, was up 20 cents to $88.03 a barrel while Brent North Sea crude for July rose 29 cents to $103.76 in the late afternoon.

Traders will be looking to the United States for some good news on Friday when crucial non-farm payroll figures will give an indication as to the state of the world’s number one economy.

Gold was at $1,566.06 an ounce at 1100 GMT, compared with $1,549.12 late Wednesday.

In other markets:

— Singapore closed down 0.41 percent, or 11.41 points, at 2,772.54.

Commodities firm Olam International was down 0.60 percent at Sg$1.67 while real estate developer Capitaland gained 1.60 percent to Sg$2.54.

— Taipei rose 0.55 percent, or 39.70 points, to 7,301.50.

Taiwan Semiconductor Manufacturing Co. surged 4.16 percent to Tw$85.1 while leading smartphone maker HTC ended 1.42 percent higher at Tw$430.0.

— Manila closed 1.45 percent, or 72.91 points, higher at 5,091.23.

The market was lifted by the announcement that the economy grew 6.4 percent in the first quarter of the year, better than expected.

DMCI Holdings gained 1.76 percent to 57.95 pesos while SM Investments rose 2.4 percent to 704 pesos.

— Wellington rose 0.20 percent, or 6.94 points, to 3,488.29.

Fletcher Building gained 0.48 percent to NZ$6.29, Telecom was up 1.18 percent to NZ$2.58 and Contact Energy gained 1.46 percent to NZ$4.88.

— Kuala Lumpur gained 0.35 percent, or 5.50 points, to 1,580.67.

Financial firm CIMB Group Holdings gained 0.13 percent to 7.50 ringgit, while telecoms company Axiata Group added 0.75 percent to 5.37 rniggit. Petronas Gas lost 1.94 percent to 17.20 ringgit.

— Jakarta tumbled 2.17 percent, or 85.09 points, to 3,832.82.

— Bangkok added 0.25 percent, or 2.87 points, to 1,141.50.

Banpu fell 3.43 percent to 450 baht, while PTT Plc added 1.95 percent to 313 baht.

— Mumbai slid 0.57 percent, or 93.62 points, to 16,218.53.

Private bank ICICI Bank slid 4.0 percent to 784.3.