A man looks at an electronic board displaying market indices and graphs outside a brokerage in Tokyo (Reuters). Reuters

Asian markets are down after Spain's rating downgrade and declining machinery orders in Japan added to the global economic worries amid concerns over US corporate earnings.

Japan's Nikkei 225 is down 0.20 percent or 16.86 points to 8579.37 at 04:01 GMT. South Korea's KOSPI has fallen 0.29 percent or 5.74 points to 1942.48.

Shanghai composite index drops 0.35 percent or 7.52 points to 2112.42. But Hong Kong's Hang Seng index is up moderately, by 0.10 percent or 21.14 points to 20940.74.

Worries over the eurozone crisis have increased after ratings agency Standard & Poor's slashed Spain's credit rating to BBB-minus, just a notch above "junk" status as the country's financial crisis threatens to get out of hand.

S&P also gave a negative outlook to the country, warning that the strength of the political system in the county to contain the crisis is decreasing.

The downgrade brings S&P's rating to the same level as Moody's which is expected to review Spain soon.

"The real test will be the Moody's review later in the month as any downgrade from this agency would place Spanish debt in junk status, heavily influencing the fortunes of the country," said Jason Hughes, Head of Premium Client Management at IG Markets.

However, he said: "The suggestion is that such downgrades could be the external market pressure required for Prime Minister Rajoy to finally accept ECB help."

Japanese industrial stocks are down after reports that machinery orders declined more than expected in August as companies look to cut costs on falling global demand. Orders fell 3.3 percent, adding to the negative business sentiments in the country.

Mitsubishi Materials is down 2.60 percent while Chiyoda Corporation falls 2.65 percent.

Shares of car maker Toyota are down 0.95 percent after the company recalled 7.43 million vehicles globally citing faulty power window switches.

Other auto majors are also down as investors remain discouraged on the yen gaining against the dollar and concerns over Sino-Japanese disputes. Mitsubishi Motors declines 2.90 percent while Honda Motor is down 0.17 percent. Nissan Motor falls 1.05 percent.

Telecom Major ZTE falls 2.54 percent in Shanghai after the company confirmed that US networking firm Cisco has ended an alliance with it following allegations that the company is a potential threat to US national security.

Financial firms are up in Hong Kong. Industrial & Commercial Bank of China gains 2.56 percent while Bank of Communications rises 2.39 percent.Bank of China is also up by 1.69 percent.

Computer manufacturer Lenovo gains 1.13 percent following reports from the research firm Gartner that the company has become the world's biggest computer producer in the third quarter, overtaking Hewlett Packard.

Aluminium related products manufacturer Daeho AL, down 7.58 percent, and solar wafers maker Nexolon which fell 6.12 percent were the major losers in Seoul.