BANGKOK (AP) -- Asian stock markets tumbled Thursday after a ratings agency threatened to downgrade the U.S. if a solution to the so-called fiscal cliff isn't negotiated among lawmakers and newly re-elected President Barack Obama.
If a deal isn't reached by Jan. 1, tax increases and government spending cuts to the tune of $800 billion automatically take effect. Some economists say such a withdrawal of fiscal stimulus has the potential to throw the world's biggest economy back into recession.
Hours after Obama defeated Republican challenger Mitt Romney in a cliffhanger election, Fitch Ratings said that the U.S. government's top 'AAA' rating would be at risk if Congress and the president did not immediately forge an agreement to avoid the fiscal cliff.
"There are fears that US lawmakers will repeat the same political divisiveness over key fiscal issues that led Standard & Poor's to remove America's triple-A debt rating in August 2011," said analysts at DBS Bank Ltd. in Singapore in a market commentary.
Japan's Nikkei 225 index shed 1.3 percent to 8,859.38. Hong Kong's Hang Seng lost 1.2 percent to 21,842.69. South Korea's Kospi dropped 1.3 percent to 1,911.54 and Australia's S&P/ASX 200 was 0.8 percent lower at 4,478.90.
News out of Europe also unnerved markets. Leaders warned that unemployment could remain high for years, and the European Commission cut its forecasts for the region's economic growth for this year and 2013. German industrial orders fell by more than expected in September, portending possible tough times ahead for Europe's largest economy.
Debt- and recession-mired Greece took a step forward with parliament's passage of an austerity bill that will further slash pensions and salaries.
Approval of the cuts and tax increases worth €13.5 billion ($17 billion) over two years was a big step for Greece's efforts to secure the next installment of its international rescue loans and stave off imminent bankruptcy.
The country's international creditors have demanded that the bill and the 2013 budget, due to be voted on Sunday, pass before they consider releasing an already delayed €31.5 billion installment from Greece's €240 billion bailout. Without it, Greece will run out of money on Nov. 16.
Also being watched by investors is Thursday's opening of China's Communist Party congress — the once-in-a-decade forum to name China's top leadership. Markets will be looking for hints on how the new leadership plans to tackle the nation's economic slowdown.
Wall Street saw its sharpest sell-off of the year. The Dow Jones industrial average plunged 2.4 percent to 12,932.73. The Standard & Poor's 500 index fell 2.4 percent to 1,394.53. The Nasdaq composite index lost or 2.5 percent to 2,937.29.
Benchmark oil for December delivery was up 40 cents to $84.84 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $4.27 to close at $84.44 a barrel in New York on Wednesday.
In currencies, the euro fell to $1.2763 from $1.2767 late Wednesday in New York. The dollar slipped slightly to 79.88 yen from 79.90 yen.
- Politics & Government
- Budget, Tax & Economy
- President Barack Obama