Asian markets, euro hit by Spain fears

HONG KONG: Asian markets tumbled for a second day and the euro sank to new lows as Spain's banking crisis threatened to spin out of control and force Madrid into a financial rescue.

The heavy losses followed a sell-off on Wall Street and in Europe, while Spanish bond yields sat at dangerous highs.

Tokyo fell 1.84 percent by the break, Hong Kong shed 1.34 percent, Sydney lost 1.04 percent, Shanghai was 0.63 percent lower and Seoul gave up 1.22 percent.

Spain has moved into focus as it struggles with a banking crisis while also battling record unemployment, a huge public deficit and a recession, raising concerns of a financial collapse.

The interest rate on its benchmark 10-year bonds surged to 6.703 percent Wednesday, which is considered unsustainable and around the levels seen in Ireland, Greece and Portugal ahead of their bailout.

The difference between yields on Spanish bonds and rock-solid German debt is now 5.41 percentage points, a euro-era record.

And while borrowing costs soar Prime Minister Mariano Rajoy's government has been asked by lender Bankia for 19 billion euros ($23.5 billion) in capital.

"There is nothing that can be considered bullish news from Europe... so the bearish news on Spain is (in the) forefront," said Dick Green at Briefing.com.

"The bottom line is that the mess in Europe remains a mess. There is no consensus across countries on how to address the credit crisis and the political institutions to deal with EU matters are still feeling their way."

On currency markets the euro bought $1.2360 in Tokyo morning trade -- a new 22-month low -- against $1.2366 in New York late Wednesday, while it was worth 97.54 yen, down from 97.76 yen. The unit has not fallen below the 97-yen level since 2000.

The dollar weakened to 78.90 yen from 79.06 yen. (AFP)