Asian stocks headed lower in early trading Tuesday, held back by intensifying worries over Greece’s ability to fend off a massive debt default and a credit downgrade slapped on Italy.
Japan’s Nikkei 225 index fell 1.4 percent to 8,739.74. Hong Kong’s Hang Seng index fell 0.6 percent at 18,811.22. South Korea’s Kospi index was 0.4 percent down at 1,814.32.
An aversion to riskier investments like stocks remains highly elevated, with little prospect of a drop any time soon,” analysts at Credit Agricole CIB wrote in a report.
Standard & Poor’s Ratings Services move to downgrade Italy’s credit rating on Monday added to “the pain and fear across eurozone markets,” Credit Agricole said.
Italy’s rating fell by one notch due to weakening economic growth prospects and higher-than-expected levels of government debt, S&P said.
Investors are looking to the U.S. Federal Reserve in search of positive news. Many economists expect the Fed, which opens a two-day policy meeting later Tuesday, to announce something to try to jolt the sputtering U.S. economy.
Last month, the Fed took the step of endorsing a plan to keep short-term interest rates near zero through mid-2013.
Eventually, some economists expect the Fed to try for the third time to stimulate growth through a program to buy Treasurys to lower long-term interest rates. That’s a step known as “quantitative easing.”
But hopes of Fed action did not mollify intensifying worries over Greece. Investors fear the nearly bankrupt country won’t be able to convince lenders that it can pay its debts and that it won’t get the money it needs to avoid a default.
The Dow Jones industrial average closed down 0.9 percent at 11,401.01 on Monday. The drop ended five days of gains for stocks and marked the return of the back-and-forth trading that has accompanied the uncertainty about Europe’s debt crisis.
The Nasdaq composite fell 0.4 percent to 2,612.83. The Standard & Poor’s 500 index fell 1 percent to 1,204.09.
