Asian stocks tumble on fresh eurozone fears

HONG KONG – Asian stock markets slumped on Tuesday, following a global sell-off as fears grew that the eurozone debt crisis will spread, raising the prospect of a devastating default.

The crisis, which came despite eurozone members agreeing to strengthen a multi-billion-dollar fund to prevent Europe’s debt woes engulfing other states, sent the single currency tumbling.

In the afternoon Tokyo fell 1.35 percent, Sydney shed 1.90 percent and Shanghai dropped 1.26 percent while Seoul tumbled 2.00 percent.

Hong Kong was 1.99 percent lower by the break.

Investors have become increasingly concerned that political leaders and bankers holding the Greek debt talks in Brussels remain unable to agree on how to avert an outright default by Athens, sending down European and US shares.

Analysts fear that the Greek problem might spread to larger economies, such as heavily indebted Italy and Spain – Europe’s third and fourth largest economies respectively.

Rome’s finances have been called into question due to worries that key austerity measures will be approved amid tensions in the cabinet, while some also point out that many cuts will not come in soon enough.

The fears sent the long-term cost of borrowing for Italy to the highest level since the creation of the eurozone.

The problems were described by one European analyst as “one of the worst moments of the European monetary crisis”.

International Monetary Fund managing director Christine Lagarde on Monday called the turmoil that has raised fears of an Italian meltdown “essentially market driven”.

But she added that while Greece “has done a lot of work” to reduce deficits, “more work needs to be done”.

On Monday the region’s 17 finance ministers agreed a range of measures including “enhancing the flexibility and the scope” of the European stability fund set up to buttress troubled members.

The talks were scheduled to finesse a second rescue package for Athens in September, but were unable to shake investor concern that Athens will be unable to pay its debts.

Athens last month averted a default after its parliament agreed to a batch of austerity measures but talks on a second bailout for the beleaguered nation have slowed.

Global markets were battered. On Wall Street the Dow closed down 1.20 percent, the S&P 500 shed 1.81 percent and the Nasdaq fell two percent.

And in Europe Milan’ FTSE Mib index plummeted 3.96 percent, the Frankfurt DAX 30 index shed 2.33 percent and the Paris CAC 40 index lost 2.84 percent.

Madrid’s Ibex 35 slid 2.69 percent and Lisbon’s PSI-20 fell 4.28 percent.

London’s FTSE-100 slipped 1.03 percent.

The euro tumbled to $1.3953 in Tokyo, from $1.4029 late Monday in New York and well down from the $1.4188 in Asia on Monday.

It was also at 111.80 yen from 112.51 yen. It fetched 114.59 yen in Asia the previous day.

The dollar traded at 80.06 yen, compared with 80.24 in New York.

“It will take one or two years for the sovereign debt issues in Europe to be resolved,” said Masayoshi Yano, a senior market analyst at Meiwa Securities in Tokyo.

“Market sentiment is fickle, switching back and forth between optimism and pessimism,” he told Dow Jones Newswires.

Despite the region-wide sell-off, Australia’s Macarthur Coal soared more than 37 percent after Peabody of the United States and European giant ArcelorMittal launched a takeover bid for the firm worth $5 billion.

On oil markets New York’s main contract, light sweet crude for delivery in August, fell 49 cents to $94.66 a barrel.

Brent North Sea crude for August delivery shed 45 cents to $116.79.

Gold, a safe haven in times of economic uncertainty, opened at $1,552.40-$1,553.40 an ounce in Hong Kong, up from $1,546.00-$1,547.00 at the close on Monday.