Asian stock markets headed lower Monday as a change of government in debt-laden Spain and Singapore’s warning of a sharp growth slowdown underlined the challenges facing the world economy.
Japan’s Nikkei 225 index fell 0.2 percent to 8,354.65. Hong Kong’s Hang Seng was 2.3 percent lower at 18,068.51. South Korea’s Kospi index dropped 1.3 percent to 1,815.48.
Benchmarks in Singapore, Taiwan and mainland China were also lower.
Market jitters were evident a day after Spain voted in a new government the third time in as many weeks that Europe’s debt crisis has toppled an administration. Governments in financially troubled Greece and Italy have also fallen.
Spain dumped its ruling Socialist government Sunday for the conservative leadership of Mariano Rajoy, who inherits an economy wracked by debt and an unemployment nightmare which at more than 21 percent is the highest among the 17 nations that use the euro.
Rajoy also must lower Spain’s soaring borrowing costs with deficit—reducing measures while preventing an already moribund economy from heading into a double—dip recession.
Adding to pessimism, Singapore on Monday warned that its economy will likely suffer a sharp slowdown next year as export demand from developed countries wanes. Because of its high reliance on trade, Singapore is often a bellwether for the rest of Asia.
Japan, meanwhile, said its exports fell for the first time in three months in October, eroded by a strong yen and a sputtering global economy.
Gains were muted on Wall Street on Friday. While the Conference Board’s index of leading economic indicators rose more than Wall Street analysts were expecting a sign that the economy may pick up in the coming months many investors were cautious as a key Congressional committee remained deadlocked on ways to cut the U.S. budget deficit.
A bipartisan panel must agree on making at least $1.2 trillion in deficit cuts by Wednesday. If the committee fails and Congress takes no other action, automatic spending cuts will take effect beginning in 2013. Economists worry that a deadlocked Congress will erode business confidence and slow the already fragile U.S. economy.
The Dow Jones industrial average gained 0.2 percent to close at 11,796.16. The Standard and Poor’s 500 lost less than 0.1 percent to 1,215.65. The Nasdaq composite slid 0.6 percent to 2,572.50.
