Asian stock markets fell on Tuesday after Standard and Poor's warned
15 countries using the euro currency that their credit ratings are at risk of a downgrade.
Italy govt approves austerity plan, Monti to forego salary Japan's Nikkei 225 dropped 1 per cent to 8,608.10. South Korea's Kospi dipped 1.1 per cent to 1,901.34 and Hong Kong's Hang Seng lost 1.6 per cent to 18,884.05. Australia's S&P/ASX 200 shed 1 per cent to 4,280.10. Benchmarks in Singapore, Taiwan and New Zealand also gave up ground. Malaysia and Thailand rose.
The S&P announcement came only hours after French President Nicolas Sarkozy and German Chancellor Angela Merkel
on Monday unveiled sweeping plans to change the European Union treaty in an effort to keep tighter checks on overspending nations.
The S&P warning left out only two of 17 countries that use the euro: Cyprus, whose bonds have near-junk status, and Greece, whose low ratings already suggest it is likely to default soon anyway.
The inclusion on the list of Germany and France means those countries could lose their coveted AAA ratings. The AAA rating is the highest available, and without it, those two countries might not be unable to raise enough money to bail out their weaker neighbors.
Merkel says solving economic crisis could 'take years' Sarkozy and Merkel discussed several broad changes for the EU treaty, including the introduction of a penalty for any government that allows its deficit to exceed 3 per cent of gross domestic product. The penalty would be automatic - unless a majority of nations opposed it, a loophole that drew sharp criticism from analysts.
Andrew Sullivan, principal sales trader at Piper Jaffray in Hong Kong, said the sanctions were "subject to political control" and in reality represent no change from mechanisms already in existence.
ALL YOU NEED TO KNOW ABOUT EU DEBT CRISIS The French-German proposal will be taken up at a summit of EU leaders on Thursday and Friday aimed at fixing a debt crisis so severe that it threatens the viability of the euro currency. A collapse could lead to a severe recession in Europe and trigger economic
ramifications across the globe.
On Wall Street, the Dow Jones industrial average rose 0.7 per cent to 12,097.83. The S&P 500 rose 1 per cent to 1,257.1. The Nasdaq added 1.1 per cent to 2,655.76.
Benchmark crude for January delivery was down 47 cents to $100.52 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 3 cents to settle at $100.99 on Monday.
In currency trading, the euro fell to $1.3368 from $1.3382 late Monday in New York. The dollar rose to 77.82 yen from 77.77 yen.
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