Asia stocks drop as Italy debt woes brew
BANGKOK—Asian stocks fell early Tuesday, as lingering concerns about Italy's ability to repay its massive debts shook investor sentiment.
Japan's Nikkei 225 index lost 0.4 percent to 8,567.61. South Korea's Kospi index fell 0.4 percent to 1,895.44. Hong Kong's Hang Seng index fell 0.6 percent to 19,400.24.
Major indexes closed higher last week as Greece and Italy moved to form new governments and took other decisive steps to get their debt troubles under control. News that the two new leaders, Mario Monti in Italy and Lucas Papademos in Greece, would take control helped boost sentiment late last week.
But investors are realizing that the new governments may have a hard time reducing debt at a time when growth in both countries is stagnant.
An additional worrisome sign emerged Monday when the Italian government sold five-year bonds at their highest interest rate since 1997. That's a sign investors are still concerned about Italy's ability to repay its debts. And Italy's biggest bank, Unicredit, reported a $14.4 billion loss.
"So far it seems investors will remain cautious until Italy's technocratic government successfully implements some of the measures required to insulate its economy from the region's debt crisis," Stan Shamu of IG Markets in Melbourne said in a report.
Stocks tanked last Wednesday after key Italian borrowing rates jumped above 7 percent, a level widely seen as unsustainable.
In New York on Monday, the Dow fell 0.6 percent to close at 12,078.98. The Standard & Poor's 500 index fell 1 percent to 1,251.79. The Nasdaq composite index fell 0.8 percent to 2,657.22.