adminblow to the region’s two-year sovereign debt crisis.
As leaders of the European Union prepare for the crucial two-day talks starting on Thursday, Standard & Poor’s turned up the pressure on them to agree a plan by putting the EU itself on watch for a possible downgrade.
Tokyo shed 0,66 percent, or 57,59 points, to end at 8 664,58, Sydney lost 0,27 percent, or 11,8 points, to 4 280,7 and Seoul was 0,37 percent lower, dipping 7,03 points to 1 912,39.
Hong Kong fell 0,69 percent, or 132,77 points, to 19 107,81 while Shanghai gave up 0,12 percent, or 2,91 points, to close at 2 329,82.
The losses come after most markets rose over the past week on hopes that after several failed attempts, Europe’s leaders would finally resolve a crisis that threatens to tear the currency union apart and lead to another global downturn.
“To date, markets have been giving both events (European Central Bank and EU meetings) the benefit of the doubt, hoping that policymakers will deliver something to address the current crisis,” said Khoon Goh, senior strategist at ANZ Bank in Wellington.
“One gets the feeling that the market has gotten itself into an uncomfortable place in pinning so much hope on a deal being reached at the EU leaders summit,” he told Dow Jones Newswires.
The ECB was to hold its policy meeting later yesterday, where it is expected to cut interest rates by 0,25 percentage points for the second straight month to 1,0 percent.
The upbeat sentiment earlier this week – after France and Germany thrashed out a plan for tighter fiscal unity – has given way to trepidation as big differences emerged between EU leaders.
The biggest obstacles according to officials and diplomats are Germany’s refusal to embark on anything short of treaty change – which some say is unnecessary – while Britain refuses to budge on its opposition to tax reform unless it secures protection for the City of London finance centre.
However, German Chancellor Angela Merkel and French President Nicolas Sarkozy are willing to push for tighter fiscal laws for just the 17 euro members if countries such as Britain are not willing to join in.
The leaders must also agree on a firewall package to protect other nations from the same fate as Greece, Ireland and Portugal – who have needed bailouts – and prevent their debt troubles spreading.
Ahead of the summit, ratings agency S&P warned the EU itself was on watch for a downgrade of its AAA status, citing its dependence on its 27 member states for its budget needs.
The move comes after Monday’s decision by S&P to put 15 of the 17 eurozone countries on negative watch.
On currency markets, the euro eased to US$1,3423 and 104,18 yen in early Asian trade from US$1,3413 and 104,15 yen in New York late on Wednesday.
The dollar was at 77,59 yen compared with 77,65 yen.
The Australian dollar lost ground on news the country’s unemployment rate rose to a higher-than-expected 5,3 percent in November from 5,2 percent in October.
The Aussie was fetching US$1,0262, from US$1,0281 just ahead of the employment report.
New York’s main contract, light sweet crude for delivery in January, rose 16 cents to US$100,65 a barrel.
Brent North Sea crude for January delivery gained 47 cents to US$110,00.
Gold was trading at US$1 738,50 an ounce from US$1 728,60 late on Wednesday. – AFP.
Online Reporter