Asia stocks down after Slovakia setback on debt

By Pamela Sampson

Associated Press

Published: Tuesday, Oct. 11 2011 9:30 p.m. MDT

Specialist Donald Vaneck works on the floor of the New York Stock Exchange Tuesday, Oct. 11, 2011. One of Wall Street's quietest days in month, Tuesday ended mixed after investors spent the day waiting to see if Slovakia would block an expansion of Europe's financial rescue program. Slovakia's decision came after U.S. stock markets closed. That country's parliament rejected a bill to strengthen the powers of a regional rescue fund. The sixteen other countries that use the euro have already signed off on the bill, but the measure requires unanimous support.

Richard Drew, Associated Press

Enlarge photo»

BANGKOK — Asian stocks slipped Wednesday after Slovakia blocked a measure to expand Europe's financial rescue program for heavily indebted countries — a setback for attempts to overcome the debt crisis.

The move by one of the smallest countries in the 17-member grouping of nations that use the euro sent markets south as worries intensified that a failure by Europe to contain its debt crisis could lead to a massive debt default by the Greek government.

Japan's Nikkei 225 index dropped 0.7 percent to 8,715.10. Hong Kong's Hang Seng fell 0.5 percent to 18,042.72. Benchmarks in Australia, Taiwan, Singapore and the Philippines were also lower, while those in mainland China and Indonesia were higher.

After a lower opening, South Korea's Kospi rose 0.2 percent to 1,790.30.

Slovakia's parliament rejected a bill Tuesday that would have strengthened the powers of a regional rescue fund to help bail out strapped economies in the eurozone.

The 16 other countries that use the euro have already signed off on the bill, but the measure requires unanimous support.

There are ways around Slovakia's opposition, but the move temporarily sets back efforts to address Europe's debt jam, which has been the most important issue for financial markets for months.

Many market watchers think the volatility will continue until heavily indebted countries like Greece, Spain and Italy have established a clear path out of their current debt mess.

"Expectations of some concrete action by officials to help resolve the crisis in the eurozone by the end of the month are a key driving force for markets but past history suggests that the risk of disappointment is high," Credit Agricole CIB said in a research note.

Greece has been on the brink of defaulting on its debt for months. If that happens, it would hurt European and U.S. banks by decimating the value of Greek government bonds they own. Those banks would then be less likely to lend to each other and to businesses. That could plug up an already weak global economy, with implications for everything from bank stocks to international trade.

The decision came after U.S. stock markets closed. The Dow Jones industrial average ended down 17 points after moving between small gains and losses throughout the day.

The Dow lost 0.1 percent to close at 11,416.3. The Standard & Poor's 500 index rose 0.1 percent to 1,195.54, and the Nasdaq composite rose 0.7 percent to 2,583.03.

Benchmark crude for November delivery was down 73 cents at $85.08 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 40 cents to settle at $85.81 in New York on Tuesday.

In currencies, the euro fell to $1.3604 from $1.3669 late Monday in New York.

The dollar strengthened to 76.70 yen from 76.66 yen.

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