HONG KONG, Oct 11: Asian markets and the euro fell on Thursday as Standard & Poor’s downgrade of Spain’s credit rating overshadowed an upbeat assessment of the US economy by the Federal Reserve.

Traders were also following a lead from Wall Street and European investors in the wake of the IMF’s decision to slash its global growth forecasts, while concerns over the upcoming corporate earnings season also weighed on sentiment. Eyes were also on a meeting which started later in the day of the finance ministers of the Group of Seven leading industrialised nations, which will take place in Tokyo.

Tokyo slipped 0.58 per cent, or 49.45 points, to 8,546.78, with the territorial spat between Japan and China continuing to sit heavily on confidence.

Sydney fell 0.16 per cent, or 7.2 points, to 4,483.5 and Seoul lost 0.78 per cent, or 15.13 points, to 1,933.09.

Shanghai finished down 0.81 per cent, or 17.07 points, to 2,102.87 but Hong Kong bucked the regional trend, rising 0.38 per cent, or 79.45 points to 20,999.05.

Standard & Poor’s said late on Wednesday it had cut Spain’s sovereign debt rating by two notches to just above junk level, citing the deepening recession and strains from the country’s troubled banks. “The downgrade reflects our view of mounting risks to Spain’s public finances, due to rising economic and political pressures,” the ratings agency said.

“The deepening economic recession is limiting the Spanish government’s policy options,” it said, adding that joblessness at 25 per cent and tighter spending will likely intensify social conflict and tensions in the country.

The news is the latest to stoke eurozone concerns as Madrid refuses to ask for an international bailout, which would in turn kickstart a European Central Bank bond-buying programme that would lower the country’s borrowing costs. S&P’s move hit the euro, which fell to $1.2869 and 100.46 yen in afternoon Asian trade from $1.2887 and 100.74 yen in New York late on Wednesday.

And the dollar slipped to 78.07 yen from 78.18 yen. The dollar got a little support from the US central bank’s latest outlook on the world’s number one economy.

In its Beige Book report, the Fed said that economic activity “generally expanded modestly” since the last report six weeks earlier, when it characterised growth as only gradual. However, Wall Street was unimpressed. The Dow fell 0.95 per cent, the S&P 500 dropped 0.62 per cent and the Nasdaq gave up 0.43 per cent.

Also sapping confidence are worries over the upcoming earnings season, with most market-watchers expecting a poor batch of results reflecting a slowdown in the global economy. Adding to these fears on Wednesday were comments from the US aluminium giant Alcoa, which said it had cut its growth forecasts because of the slowdown in China.

In other markets: Taipei fell 1.85 per cent, or 140.29 points, to 7,451.72. Hon Hai Precision fell 3.7 per cent to Tw$86.0 while TSMC shed 1.84 per cent to Tw$85.5.

Wellington slipped 0.12 per cent, or 4.84 points, to 3,883.30. Telecom fell 0.21 per cent to NZ$2.33, Fletcher Building added 1.1 per cent to NZ$7.24 and Fisher & Paykel Appliances was flat at NZ$1.23.

Manila slid 0.30 per cent, or 16.13 points, to 5,353.47. Philippine Long Distance Telephone fell 0.95 per cent to 2,698 pesos while shopping centre developer SM Investments dropped 1.70 per cent to 780 pesos.

Singapore closed down 0.04 per cent, or 1.15 points, to 3,032.66. Singapore Airlines shed 0.57 per cent to Sg$10.52 and Singapore Telecommunications fell 1.26 per cent to Sg$3.14.

Jakarta closed up 0.12 per cent, or 4.95 points, at 4,284.96. Indocement rose 0.48 per cent to 20,850 rupiah, Gudang Garam added 0.48 per cent to 51,850 rupiah, while Aneka Tambang lost 0.78 per cent to 1,280 rupiah.

Kuala Lumpur fell 0.24 per cent, or 3.93 points, to close at 1,655.47. Tenaga Nasional lost 0.1 per cent to 6.99 ringgit, while Axiata Group fell 1.9 per cent to 6.58. Telekom Malaysia inched up 0.3 per cent to 6.29 ringgit.

Mumbai rose 0.93 per cent, or 173.65 points, to 18,804.75. Infosys gained 1.09 per cent to 2,531.49 rupees while real-estate firm Unitech jumped 17.49 per cent to 27.2 rupees.—AFP