Asian Markets Lower after S&P Eurozone Downgrade Threat

Posted December 6th, 2011 at 2:25 am (UTC-5)
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Asian markets were trading lower Tuesday after the Standard and Poor’s rating agency said it may soon downgrade 15 eurozone countries if European leaders cannot come up with a plan to fix the region’s debt crisis.

Tokyo’s Nikkei index, South Korea’s Kospi and Hong Kong’s Hang Seng are all down more than one percent, while Australia’s ASX 200 ended down 1.5 percent following the S&P report, which was released after U.S. markets closed on Monday.

The credit rating agency placed 15 of the 17 countries that use the euro on a negative credit watch. The list included many economies that have long been considered among Europe’s strongest, such as France and Germany.

Hong-Kong-based investment analyst Francis Lun said the move came as no surprise to investors.

S&P’s move came after French President Nicolas Sarkozy and German Chancellor Angela Merkel called for stricter financial oversight among the European Union’s 27 member nations.

After meeting in Paris Monday, Mrs. Merkel and Mr. Sarkozy proposed a new European Union treaty that would require EU members to submit their national government budgets to review by the European Court of Justice, with sharp penalties if they violate spending rules.

European leaders will discuss the proposal at a two-day meeting beginning on Thursday that aims to come up with a comprehensive plan to resolve the region’s 2-year-old debt crisis.

Also Tuesday, the Asian Development Bank downgraded its 2012 economic forecast for emerging countries in East Asia because of continuing global economic uncertainties.

The Manila-based bank trimmed its growth forecast for the 14 East Asian countries from 7.5 percent to 7.2 percent, partly because of what it said were deep recessions in Europe and the United States.