Markets in Asia aren't immune to the latest turmoil in the euro zone, and Japanese exporters are bearing the brunt of declines. The WSJ's Deborah Kan speaks with Isabella Steger.
Chinese stocks fell for a fourth straight session and other Asian markets generally declined, as a string of euro-zone downgrade and stalled debt talks in Greece thrust Europe's crisis back into the spotlight.
Japan's Nikkei Stock Average fell 1.4% to 8378.36, Australia's S&P/ASX 200 index dropped 1.2% to 4147.2 and South Korea's Kospi declined 0.9% to 1859.27.
China's Shanghai Composite shed 1.7% to 2206.19, Hong Kong's Hang Seng Index lost 1% to 19012.20 and Taiwan's Taiex shed 1.1% to 7103.62, with President Ma Ying-jeou's election victory unable to dent the Europe-inspired gloom.
In India, the Sensex edged up 0.2% to 16189.36.
U.S. markets were closed Monday for the Martin Luther King Day holiday.
Analysts said China's shares will likely stay soft ahead of the weeklong Lunar New Year holiday that begins on Jan. 22, given concerns about China's economic slowdown and disappointment that China hasn't cut its reserve requirement for banks, which had been expected. The government reports fourth-quarter growth on Tuesday, and a poll of 12 economists by Dow Jones Newswires expects gross domestic product likely rose 8.6% in the fourth quarter from a year earlier, down from a 9.1% growth in the third quarter.
On Friday, Standard & Poor's cut the credit ratings of France and Austria, which had been triple-A, by one notch, in addition to lowering the less-lofty ratings of Malta, Slovenia and Slovakia by one notch and those of Portugal, Cyprus, Italy and Spain by two notches.
While the downgrades didn't come as much of a surprise, they served as a sharp reminder that Europe's debt crisis is far from being resolved, analysts said.
"People are looking at the repercussions of the downgrades," said Tom Kaan, director of equity sales at Louis Capital Markets in Hong Kong. "The pertinent issue is not the sovereign-debt cuts, it's the ensuing downgrades for the French banks. That is creating a lot of negativity in the market. The contagion impact will be on the U.K. and the U.S. banks as well."
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Also Friday, Greece's talks with private-sector creditors broke. Crucial negotiations to restructure the nation's debt are expected to resume on Wednesday.
Financial stocks were hit across Asia.
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Close Bloomberg NewsA man looked at an electronic stock board displaying exchange rates outside a securities firm in Tokyo on Monday.
In Tokyo, Nomura Holdings dropped 2.8% and Mitsubishi UFJ Financial Group shed 2.7%. Australia & New Zealand Banking dropped 1.6% in Sydney, Shinhan Financial Group gave up 2.1% in Seoul and Chinatrust Financial Holding fell 4.2% in Taipei.
China Life Insurance fell 3.3% and Ping An Insurance Group lost 2.5% in Hong Kong; in Shanghai, the two shed 0.4% and 1.2%, respectively.
Shipping shares also suffered notable losses. Kawasaki Kisen Kaisha dropped 3.8% in Tokyo and Hanjin Shipping fell 1.6% in Seoul, while China Cosco Holdings shed 3.8% in Hong Kong and 2.2% in Shanghai.
China Southern Airlines slumped 8.6% and Air China shed 5% in Hong Kong after Citigroup downgraded both to "sell"; in Shanghai, they fell 2.5% and 1.6%, respectively.
European-exposed exporters declined in Japan, as the euro sank to a fresh 11-year low against the Japanese yen. Mazda Motor dropped 3.1%, while Sony gave up 2.3%.
Elpida Memory lost 3.2% amid reports the chip maker, struggling with weak sales and a soaring yen, aims to put together a restructuring plan for creditors by the end of January.
—Rose Yu contributed to this article.
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