EU crisis sparks decline for markets

Asian stock markets slid today as enthusiasm for a European plan to rescue Spain's teetering banks turned to scepticism.

An offer by the 17 countries that use the euro to loan Spain up to €100bn to revive banks crushed by bad real estate loans was initially met with euphoria, driving markets up yesterday.

But concerns have quickly grown that the rescue is a bandage that will not prevent Spain's severe economic problems from getting worse.

A further deterioration in Spain's situation would intensify the broader European debt crisis that is dragging on world growth.

Japan's Nikkei 225 index fell 1.3% to 8,514.76. South Korea's Kospi lost 1% to 1,848.75 and Hong Kong's Hang Seng was 0.9% lower at 18,785.84.

Benchmarks in Singapore, Taiwan and mainland China fell. But Australia's S&P/ASX 200 rose 0.3% to 4,073.90.

Spain became the fourth European nation to seek a rescue, after Greece, Portugal and Ireland. Some investors fear it is only a matter of time before Italy becomes the next country to ask for help.

Italy's government on Monday confirmed that the country's recession is deepening. The economy contracted at a quarterly rate of 0.8% in the first three months of the year, the worst contraction in three years and double Spain's rate.

Adding to market worries was China's economic slowdown. A large steelmaker in China, Baoshan Iron & Steel, said it lowered steel prices as demand from makers of appliances and cars slowed. Shanghai-listed Baoshan fell 1.5%.

The news sent other Asian steelmakers lower. Japan's Nippon Steel sank 2.9% and South Korea's Posco fell 1.9%.