In this Nov. 7, 2011 photo, trader Edward Schreier, center, works on the floor of the New York Stock Exchange. Uncertainty over who will lead Italy through the debt crisis once Premier Silvio Berlusconi resigns slammed European stocks and bonds on Wednesday, Nov. 9, 2011, pushing Rome's borrowing rates to worrying new highs.
(AP Photo/Richard Drew)
Asian stocks plunge on Europe debt crisis setbacks
In this Nov. 7, 2011 photo, trader Edward Schreier, center, works on the floor of the New York Stock Exchange. Uncertainty over who will lead Italy through the debt crisis once Premier Silvio Berlusconi resigns slammed European stocks and bonds on Wednesday, Nov. 9, 2011, pushing Rome's borrowing rates to worrying new highs.
(AP Photo/Richard Drew)
BANGKOK—Setbacks in Europe's efforts to isolate a debt crisis before it engulfs Italy or blows up into an all-out recession sent Asian stock markets tumbling Thursday.
Japan's Nikkei 225 index fell 2.4 percent to 8,549.94 and Hong Kong's Hang Seng dived 4.4 percent to 19,127.04. South Korea's Kospi slid 3.4 percent to 1,842.80 and Australia's S&P/ASX 200 lost 2.7 percent to 4,229.10.
The losses in Asia tracked those in New York, where the Dow Jones industrial average fell almost 400 points, its worst decline since Sept. 22.
Global stock markets were rattled Wednesday, when Italy's main borrowing rate blew past 7 percent. That was considered an important level because Greece, Portugal and Ireland required bailouts from other nations when interest rates on their bonds hit 7 percent.
"Risk appetite took a severe hit yesterday as eurozone crisis deepened with contagion to Italy," Credit Agricole CIB wrote in a research report. "Given the sheer size of the Italian bond market ... the impact of its insolvency would be disastrous."
Greece has been the focus of Europe's debt crisis for the past two years. The country has survived since May 2010 on a euro110 billion ($150 billion) rescue loan package but needs another huge injection of funds to prevent a massive default on its debt.
But now debt-heavy Italy has moved front and center: as the third-largest economy in Europe, its $2.6 trillion debt is considered too large for other European countries to absorb. A default could lead to the disintegration of the euro currency used by 17 nations or a debilitating recession.
Investors were further unnerved after government talks in Greece aimed at avoiding a default on its massive debts broke down in chaos. Markets fear that a Greek default would lead to huge losses for European banks -- and potentially to a global lending freeze similar to what happened after Lehman Brothers fell in 2008.
The Dow finished down 389.24 points, at 11,780.94, its worst decline since Sept. 22. The S&P 500, the broadest major stock index, closed down 3.7 percent, or 46.82 points, at 1,229.10 -- its worst day since Aug. 18. The Nasdaq composite index lost 3.9 percent at 2,621.65.
European stock markets fell sharply, too. The main stock index in Italy finished the day down 3.8 percent. The DAX index in Germany and the CAC-40 in France each declined 2.2 percent.
Benchmark crude for December delivery was down 25 cents at $95.49 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.06 to settle at $95.74 in New York on Wednesday.
In currencies, the euro rose to $1.3542 from $1.3540 in late trading Wednesday in New York. The dollar slipped to 77.77 yen from 77.85 yen.
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