TOKYO (Dec 19): Asian stocks fell on Monday on fears possible credit ratings downgrades of several European countries could derail progress towards resolving the euro zone's debt crisis, while the euro steadied after its worst weekly performance in three months.
MSCI's broadest index of Asia Pacific shares outside Japan fell 0.7 percent on Monday, while Tokyo's Nikkei stock average opened down 0.5 percent.
Fitch Ratings warned on Friday it may downgrade France and six other euro zone countries, saying a comprehensive solution to the region's debt crisis was "technically and politically beyond reach".
Fitch revised the outlook on France's top-notch rating to negative, saying the downgrade was not imminent but could come in two years. For Belgium, Cyprus, Ireland, Italy, Slovenia and Spain, a downgrade could come much sooner, as those nations were
placed on credit watch negative, which traditionally signals the possibility of a downgrade within three months at most.
"Investors will remain cautious of Europe's sovereign debt problems and volume will remain thin on the Tokyo Stock Exchange as foreign investors leave ahead of the Christmas holiday," said Hiroichi Nishi, equity general manager at SMBC Nikko Securities.
European policy makers made some progress in pursuing fiscal consolidation in Europe at a key summit meeting earlier in the month, but failed to nail down a convincing commitment for a crucial bailout scheme, prompting rating agencies to respond negatively.
Markets will wait for the outcome of a finance ministers' teleconference from 1430 GMT on Monday.
European Union officials said euro zone finance ministers will discuss the draft text of the new euro zone fiscal compact so that it can be finalised by the end of January. They will also consider the size of individual bilateral loans to the International Monetary Fund (IMF).
The financing method involving the IMF is vital in boosting the capacity to help struggling euro zone countries secure funds if needed, as they face soaring borrowing costs from the markets on concerns over their ability to pay huge public debts.
But there has not been an agreement on this scheme, with the Bundesbank, Germany's central bank, saying it would only contribute if non-euro zone and non-European countries did too, and the level of outside commitment is not clear.
Yields on highly-indebted euro zone countries stayed elevated at a level widely seen as unsustainable.
The 10-year Italian government bond yield crept back above 7 percent on Friday.
The euro stood at $1.3035 on Monday, off an 11-month low of $1.2944 hit last week.
Short-covering, when traders buy back a currency they have previously sold to realise gains on a bet it would fall, could underpin the currency as investors are very short on the euro.
International Monetary Market data released on Friday showing net short positions as of Dec. 13 in the euro against the dollar blew out to a 116,457 following a disappointing EU Summit.
Asian credit markets were subdued early in Asia on Monday, with spreads on the iTraxx Asia ex-Japan investment grade index holding steady from late last week. - Reuters
MSCI's broadest index of Asia Pacific shares outside Japan fell 0.7 percent on Monday, while Tokyo's Nikkei stock average opened down 0.5 percent.
Fitch Ratings warned on Friday it may downgrade France and six other euro zone countries, saying a comprehensive solution to the region's debt crisis was "technically and politically beyond reach".
Fitch revised the outlook on France's top-notch rating to negative, saying the downgrade was not imminent but could come in two years. For Belgium, Cyprus, Ireland, Italy, Slovenia and Spain, a downgrade could come much sooner, as those nations were
placed on credit watch negative, which traditionally signals the possibility of a downgrade within three months at most.
"Investors will remain cautious of Europe's sovereign debt problems and volume will remain thin on the Tokyo Stock Exchange as foreign investors leave ahead of the Christmas holiday," said Hiroichi Nishi, equity general manager at SMBC Nikko Securities.
European policy makers made some progress in pursuing fiscal consolidation in Europe at a key summit meeting earlier in the month, but failed to nail down a convincing commitment for a crucial bailout scheme, prompting rating agencies to respond negatively.
Markets will wait for the outcome of a finance ministers' teleconference from 1430 GMT on Monday.
European Union officials said euro zone finance ministers will discuss the draft text of the new euro zone fiscal compact so that it can be finalised by the end of January. They will also consider the size of individual bilateral loans to the International Monetary Fund (IMF).
The financing method involving the IMF is vital in boosting the capacity to help struggling euro zone countries secure funds if needed, as they face soaring borrowing costs from the markets on concerns over their ability to pay huge public debts.
But there has not been an agreement on this scheme, with the Bundesbank, Germany's central bank, saying it would only contribute if non-euro zone and non-European countries did too, and the level of outside commitment is not clear.
Yields on highly-indebted euro zone countries stayed elevated at a level widely seen as unsustainable.
The 10-year Italian government bond yield crept back above 7 percent on Friday.
The euro stood at $1.3035 on Monday, off an 11-month low of $1.2944 hit last week.
Short-covering, when traders buy back a currency they have previously sold to realise gains on a bet it would fall, could underpin the currency as investors are very short on the euro.
International Monetary Market data released on Friday showing net short positions as of Dec. 13 in the euro against the dollar blew out to a 116,457 following a disappointing EU Summit.
Asian credit markets were subdued early in Asia on Monday, with spreads on the iTraxx Asia ex-Japan investment grade index holding steady from late last week. - Reuters
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