Asian Markets Tumble as Eurozone Tensions Return

Asian markets declined in the morning tracking the US stocks as fresh eurozone political tensions gave rise to renewed concerns on the region's recovery prospects.

Japan's Nikkei tumbled 1.08 percent or 121.77 points to 11138.58 while South Korean benchmark KOSPI was down 0.78 percent or 15.17 points to 1938.04. Australia's S&P/ASX 200 dropped 0.47 percent or 23.20 points to 4884.30.

Hong Kong's Hang Seng plunged 1.71 percent or 405.40 points to 23279.61. China's Shanghai Composite Index fell 0.75 percent or 18.30 points to 2409.85.

Mounting political uncertainty in Spain and Italy has dampened investor sentiments, weighing global markets lower. Wall Street had ended the previous session in the red, with Standard & Poor's 500 Index recording its worst trading day since November.

Spanish Prime Minister Mariano Rajoy is under pressure to resign after the corruption scandal that has dominated reports in the recent days. Rajoy, who had denied allegations last week itself, reiterated his stand at the meeting with German Chancellor Angel Merkel early this week. He also sought to dismiss concerns that the government was affected by the scandal, which could stall the much-needed economic reforms and austerity plans for the embattled nation. Spanish bond yields, which have been under pressure over the concerns, made their biggest one-day percentage gain in months.

"The fear for investors is that these allegations, though denied by PM Rajoy, will prompt bouts of civil unrest and the removal of the current government which would pave the way for general elections," said Joe Rundle, head of trading at ETX Capital.

"That would open the door for leftist parties, against the fiscal consolidation and anti-euro zone which would raise worries about a sovereign bailout/exit for Spain".

Italian political issues too caused uneasiness in the markets. Concerns that the former Prime Minister Silvio Berlusconi could return to power paved way for fears on the country's chances at solving its fiscal crisis. The 10-year Italian bond yields rose the most since late December.

Japanese stocks snapped the recent rallies on the back of the weak yen as investors looked to book profits. The dollar continued to remain firm against the yen at 92.32 yen. The local currency is expected to remain under pressure as traders remain optimistic on more central bank stimulus measures.

Major Movers

Industrial stocks traded lower in Tokyo. Hitachi was down 6.88 percent after the firm's quarterly net profit failed to meet expectations. Fujikura fell 6.22 percent.

Fujitsu slipped 2.25 percent following a Nikkei report that the firm could post a fiscal-year net loss of about ¥100bn.

Financial major with significant European exposure HSBC Holdings fell 2.11 percent in Hong Kong. Resource stocks too traded lower. China Petroleum and Chemical Corp was down 6.85 percent while PetroChina slipped 2.38 percent.