Stocks fall as euro worries persist

Asian stocks fell today after a meeting of Europe’s finance ministers failed to stem fears that the euro currency union is hurtling toward a break-up.

Banking stocks slumped after some of the world’s top financial institutions were slapped with a credit rating downgrade.

Benchmark oil hovered below 99 US dollars per barrel and the dollar rose against the euro but fell against the yen.

Japan’s Nikkei 225 index dropped 1.2% to 8,376.45 and South Korea’s Kospi shed 0.7% to 1,841.79. Hong Kong’s Hang Seng lost 1.9% to 17,911.21. Australia’s S&P/ASX 200 fell marginally to 4,099.

Benchmarks in Singapore, Taiwan and mainland China were also lower. Indonesia, Malaysia and New Zealand rose.

Sentiment was dented after a meeting in Brussels of finance ministers from the 17 countries that use the euro ended without an announcement on plans to contain the debt crisis that is threatening to shatter the currency union.

The ministers sent debt-riddled Greece €8bn to stem an immediate cash crisis, but they kicked more difficult issues – such as whether countries should cede some control over their finances to a central European authority - to the leaders of the European Union who meet next week.

In the latest sign of trouble, Italy was forced to pay a high interest rate on an auction of three-year debt yesterday. The 7.89% rate was nearly three percentage points higher than last month, an enormous increase.

If Italy were to default on its debt of €1.9tn, the fallout could spell ruin for the euro common currency and send shock waves through the global economy. Such a prospect has left little appetite for risky assets.