Asian shares down on European debt fears

HONG KONG: Asian stock markets fell further Wednesday as traders grow concerned about the eurozone sovereign debt crisis and a possible Greek default.

The euro was sold after ratings agency Moody's downgraded two top French banks due to their exposure to the eurozone woes while investors were also spooked by comments from Chinese premier Wen Jiabao warning of a tough road ahead for Europe's indebted countries.

Attention is now on a conference call between the leaders of Greece, France and Germany as they try to navigate a way out of the crisis.

Tokyo fell 1.14 percent, or 97.98 points, to 8,518.57 and Sydney shed 1.64 percent, or 66.9 points, to 4,005.8.

Seoul tumbled 3.51 percent, or 63.65 points, to 1,749.28, with dealers playing catch up with heavy losses at the start of the week, when the KOSPI was closed for a public holiday.

Hong Kong was down 1.67 percent in the afternoon while Shanghai was 0.55 percent off.

The losses came despite an upbeat lead from New York, where all three major indices posted healthy gains on hopes for a good outcome from Wednesday's three-way talks.

The Dow rose 0.40 percent, the S&P 500 added 0.91 percent and the tech-heavy Nasdaq rallied 1.49 percent.

The teleconference between German Chancellor Angela Merkel, French President Nicolas Sarkozy and Greek Prime Minister George Papandreou comes after markets were hammered on Monday by renewed fears of a Greek default.

But Germany and France denied rumours that they had new proposals for a Greek rescue plan.

The euro and stock markets were buoyed on Tuesday by reports that China was in talks to buy Italian government bonds.

However, dealers remain tense as they fear Greece's troubles are far from over, while there are also concerns that other economies could be sucked into the crisis, with Italy and Spain the most at risk.

"The market is certainly cheap (after recent falls), but there is a lot of caution about," said Macquarie Private Wealth investment adviser James Rosenberg.

"The European debt crisis is not over and this is just a lull in the storm. Global risks have risen in the past month," he told Dow Jones Newswires.

Adding to the sense of foreboding, Wen said in his speech to open the World Economic Forum in Dalian that China would continue to invest in the troubled eurozone but said the region's leaders had to "put their houses in order".

"Sovereign debt risks are growing in some countries, causing turbulence on the international financial market," he said.

"Unemployment in major economies remains high, while emerging economies are facing upward inflationary pressure. All this shows that the world economic recovery will be a long-term, difficult and complicated process."

On currency markets the euro remained under pressure, buying $1.3632 in afternoon Asian trade, down from $1.3689 in New York late Tuesday but well up from the $1.3500 it touched on Monday.

The European common currency also fell to 104.80 yen from 105.21 in New York, but also higher than the 10-year lows around 104 seen on Monday.

The dollar was at 76.88 yen, just off the 76.91 in New York.

Oil prices were depressed due to worries that the eurozone crisis will dampen demand.

New York's main contract, light sweet crude for delivery in October, was down $1.48 to $88.73 a barrel in afternoon trade, and Brent North Sea crude for October settlement eased 59 cents to $111.30.

Gold was trading at $1,830.80 an ounce at 0600 GMT on Wednesday, up from $1,818.60 in late trade Tuesday.

In other markets:

-- Taipei fell 2.20 percent, or 162.90 points, to 7,228.47.

Fubon Financial Holding was off 3.29 percent at Tw$35.3 while Taiwan Semiconductor Manufacturing Co was 1.75 percent lower at Tw$67.2.

-- Manila fell 0.79 percent, or 34.05 points, to 4,258.86.

SM Investments fell 0.5 percent to 549.50 pesos, Lepanto Mining shed 5.1 percent to 1.29 pesos and geothermal power producer Energy Development lost 0.3 percent to 6.11 pesos.

-- Wellington fell 0.65 percent, or 21.30 points, to 3,264.11.

Fletcher Building was 1.2 percent lower at NZ$7.62, Sky City lost 2.0 percent to NZ$3.38 and Telecom was unchanged at NZ$2.52.

Copyright AFP (Agence France-Presse), 2011