Asian markets down over euro debt crisis fears

Asian stock markets tumbled in early trading on Tuesday, a day after German leaders warned that a comprehensive solution to Europe’s debt crisis may not be near.

Japan’s Nikkei 225 lost 1.5 per cent to 8,742.57. Hong Kong’s Hang Seng index plunged 3.5 per cent to 18,219.73. South Korea’s Kospi fell 1.5 per cent to 1,836.87.

Benchmarks in Singapore, Taiwan, mainland China and Australia were also lower.

Expectations that a solution to the crisis could be reached at a European summit in Brussels this weekend helped lift stocks last week. But stock markets in Europe and the U.S. tumbled on Monday after German Finance Minister Wolfgang Schaeuble said those expectations were too optimistic.

The Dow Jones industrial average dropped 2.1 per cent to close at 11,397. The S&P 500 index lost 1.9 per cent to 1,200.86. The Nasdaq composite index fell 2 per cent to 2,614.92.

Concerns about a messy default by the Greek government have been the main cause behind many of the big swings on the world’s stock markets lately.

The fear is that a default would cause deep losses for European banks that hold Greek bonds. That could lead to a freeze in lending between banks and escalate into another financial crisis similar to the one that occurred in 2008 after the collapse of Lehman Brothers.