HONG KONG - Asian markets reversed the previous day's gains and the euro sank back towards four-month lows Wednesday after Greece's former premier warned there was a chance his country will exit the eurozone.
Lucas Papademos' comments came ahead of a European summit aimed at addressing Athens' debt crisis and tempered optimism after France and Germany said they would do whatever it takes to keep Greece in the bloc.
Wall Street provided an anaemic lead despite strong US housing data indicating a turnaround in the crucial sector, while a downgrade of Japan debt rating late Tuesday also weighed.
Tokyo tumbled 1.98 per cent, or 172.69 points, to end at 8,556,60, Seoul fell 1.10 per cent, or 20.07 points, to 1,808.62 while Sydney slumped 1.31 per cent to close 54.0 points weaker at 4,067.0.
In the afternoon Hong Kong shed 1.28 per cent and Shanghai eased 0.56 per cent.
European leaders will later in the day meet in Brussels to discuss solutions to the Greek crisis as the country prepares to hold a second general election on June 17.
Analysts fear a likely victory for anti-austerity parties will see Athens renege on its bailout terms and eventually leave the euro, which could have a knock-on effect for other troubled economies such as Spain and Italy.
Papademos, who stepped down this month, said in an interview with Dow Jones Newswires published Tuesday: "The risk of Greece leaving the euro is real."
He added that preparations were being made in case Greece exits the 17-nation currency union.
There were also concerns over Wednesday's summit after Germany reasserted its stance against eurobonds - which would see nations guarantee each other's borrowings - despite calls from other members and the International Monetary Fund to look at the plan.
Meanwhile, the Organisation for Economic Development and Cooperation lowered its outlook for the eurozone to a 0.1 per cent contraction, urging more easing of monetary policy and euro-wide measures to boost growth.
"The crisis in the euro area has become more serious recently, and it remains the most important source of risk to the global economy," OECD chief economist Pier Carlo Padoan warned.
The euro lost ground against the dollar and yen in Asian trade.
The euro fetched US$1.2670 and 100.80 yen in Tokyo afternoon trade, lower than US$1.2684 and 101.45 yen in New York late Tuesday.
The dollar slipped to 79.54 yen from 79.98 yen.
Junichi Ishikawa, forex analyst at IG Market Securities in Tokyo, said: "I personally don't think much will come out of the EU Summit that will drastically alter the situation in Greece or Spain."
In Japan traders were also absorbing Fitch's announcement it had cut the country's credit rating by two notches, and giving it a negative outlook, blaming "leisurely" efforts at shrinking its massive public debt.
The move follows similar downgrades by rival agencies Moody's and Standard & Poor's in the past year and a half.
And on Wednesday Tokyo posted a bigger-than-expected trade deficit of 520.3 billion yen (S$8.3 billion) in April due to higher energy costs.
The deficit was larger than a shortfall of 477.7 billion yen registered in April 2011, a month after Japan was hit by a huge earthquake and tsunami.
On Wall Street the Dow and the S&P 500 index both ended flat despite getting an early fillip from news that existing US home sales rose 3.4 per cent in April while prices continued to rise.
The tech-heavy Nasdaq lost 0.29 per cent as investors dumped Facebook shares for a second straight day.
The social networking site has now tumbled 18.0 per cent since its debut on Friday amid accusations that leading underwriters cut their projections days ahead of the initial public offering.
Oil prices eased. New York's main contract, West Texas Intermediate crude for delivery in July, was down 78 cents at US$91.07 per barrel while Brent North
Sea crude for the same month shed 69 cents to US$107.72 in afternoon trades. Gold was US$1,557.71 an ounce at 0650 GMT, compared with US$1,577.80 late Tuesday.
In other markets:
- Taipei fell 127.14 points, or 1.75 per cent at 7,147.75.
Taiwan Semiconductor Manufacturing Co dived 3.77 per cent at Tw$79.1 while leading smartphone maker HTC was 2.09 per cent lower at Tw$422.5.
- Wellington closed 0.56 per cent, or 19.66 points, lower at 3,510.20.
Telecom Corp. was off 2.46 per cent at NZ$2.575 and Fletcher Building was down 1.25 per cent at NZ$6.30. |
