Hong Kong: Asian equities suffered sharp losses on Tuesday while the euro remained under pressure on escalating worries that the threat of contagion from the Greek debt crisis could lead to more countries requiring financial aid.
Stock markets in Australia, , Japan and South Korea lost between 1.0% to 1.9%, while the MSCI index of Asia-Pacific shares outside Japan fell 1.5%.
The broader Asia index has snapped three straight weeks of gains on investor expectations that the second half held better prospects for risky assets than the first.
Adding to stock market woes, US equities retreated across the board on Monday, reporting their worst day in nearly a month on concern about the stalemate in US budget talks and Europe’s growing debt problems.
In a bid to stop financial contagion engulfing Italy and Spain, euro zone finance ministers promised cheaper loans, longer maturities and a more flexible rescue fund on Monday .
“Speculation that a number of Spanish and Italian banks will fail the second round of EU stress tests weighed on riskier assets and the euro,” RBS strategists said in a note.
“It appears that the important “firewall” around Spain and Italy has broken decisively.”
Policymakers have been seized with a new sense of urgency after Italy came under market attack last week, fearing any further delay in putting together a second Greek package could poison investor confidence in weak economies around the region.
The euro was last at 1.1711 Swiss francs , having plumbed a record low around 1.1670 francs. Against the yen, it stood at 112.41 , not far from a four-month low around 112.27 plumbed overnight.
Versus the dollar, the common currency hit a seven-week low around $1.3985 before recovering a bit of ground to last stand at $1.4013 .
Central bank meetings are in focus in Asia on Tuesday, with the Bank of Japan expected to hold off on easing monetary policy further and present a brighter view on the economy, encouraged by a pickup in factory output and recovery in business sentiment.
But the central bank will likely warn of lingering risks to the global economy.
JGB futures jumped, tracking gains in US Treasuries after eurozone problems rattled investors and stoked appetite for bonds.
Indonesia’s will likely leave its benchmark overnight policy rate on hold for a fifth straight month on Tuesday after June data showed annual inflation eased to a one-year low.
Indonesia is Asia’s best stock performer this year, with a rise of nearly 8%.
Spot gold held steady above $1,550 per ounce as investors fled riskier assets to buy bullion.
Brent futures for August lost 0.4% to $116.8 a barrel.