A global markets sell-off spread to Asia, sending the region’s stocks lower amid fears the worsening European debt crisis would throw the world economic recovery off track.
The Australian share market closed firmly lower on the double-whammy of lower commodity prices and credit ratings downgrades for Greece and Portugal.
At the 1615 AEST close the benchmark S&P/ASX200 index had fallen 57.2 points to 4,822.8 points .. while the broader All Ordinaries index had dipped 59.1 points to 4,854.2 points.
Selling was widespread across Asia after European and US markets tumbled overnight.
The euro, after plummeting to levels not seen in a year, regained some footing, while oil prices dropped toward $82 a barrel.
Concerns about Europe intensified after Standard & Poor’s downgraded Greece’s debt to junk status and cut Portugal’s credit rating by two notches – making it harder for both countries to pay down their debts and raise money to fund their budgets.
Investors have been on edge for months about Greece’s fiscal crisis. The country has already acknowledged it can’t pay debts due shortly and has asked for a bailout from European neighbours and the International Monetary Fund.
There are now fears Portugal could be the next weak European economy to require help, followed by the region’s other debt-laden countries.
“The fear is that Greece and Portugal are just the appetisers,” said Lorraine Tan, director of equities research at Standard & Poor’s in Singapore. “
The concern is it is going to spread and have an impact on the financial system and ultimately on the economy.”
Japan’s Nikkei 225 stock average led the region-wide retreat with a 2.5 per cent fall to 10,931.30, as anxiety about Europe overshadowed earnings reports showing solid recovery among Japanese companies.
Elsewhere, Hong Kong’s Hang Seng dropped 1.3 per cent to 20,994.27 and South Korea’s Kospi was off 1.2 per cent to 1,728.25.
Markets in Australia, Shanghai and India retreated by about 1 per cent each.
In currencies, the euro stabilised after a steep drop the day before to a near 1-year low, trading up at $1.3203 from $1.3155.
The dollar rose to 93.14 yen from 93.07 yen.
Oil prices dropped for a second straight day, with benchmark crude for May delivery down 22 cents at $82.22 a barrel.
In the US Friday, the Dow Jones industrial average fell 1.9 per cent to 10,991.99 in its worst loss in almost three months.
The Standard & Poor’s 500 index fell 28.34, or 2.3 per cent, to 1,183.71.