U.S. Markets closed

Asian stocks sink on US fiscal cliff fears

Kelvin Chan, AP Business Writer

A currency trader watches monitors in front of screens showing the Korea Composite Stock Price Index (KOSPI), center, and foreign exchange rate, left, at the foreign exchange dealing room of the Korea Exchange Bank headquarters in Seoul, South Korea, Thursday, Nov. 8, 2012. South Korea's Kospi dropped 1.19 percent at 1,914.43. (AP Photo/Ahn Young-joon)

HONG KONG (AP) -- Most Asian stock markets sank Friday, weighed down by fears over the so-called U.S. "fiscal cliff" that's seen as a big threat to the economic recovery. Chinese stocks edged higher as investors awaited economic data they hoped would show a pickup in growth.

Japan's Nikkei 225 index fell 0.8 percent to 8,768.43 and Hong Kong's Hang Seng shed 0.4 percent to 21,472.65. South Korea's Kospi retreated 0.5 percent to 1,905.33.

Australia's S&P ASX 200 dropped 0.5 percent to 4,461.30 after the central bank released a downbeat assessment of the country's economy.

The slump in major Asian stock markets mirrored the trend in markets worldwide as investors have refocused on challenges to the world economy following President Barack Obama's re-election. Many worry that gridlock in Washington will prevent the president and Congress from reaching a deal before the package of tax increases and government spending cuts kicks in on Jan. 1.

Investors also have renewed fears about Europe's lingering debt crisis. European Central Bank President Mario Draghi warned that the economy of the 17 nation grouping that uses the euro remains weak and will struggle to grow even with "visibly improved" confidence among the currency union's financial markets.

Asian stocks are "going to be very much driven by the U.S. and Europe," said Peter Esho, chief market analyst at City Index Asia Pacific in Sydney. But "I think things will change in the first quarter of 2013 with a coordinated Chinese response" to the country's painful slowdown, he said.

Mainland Chinese stocks were slightly higher as investors awaited reports on industrial production, fixed asset investment and retail sales that would provide the latest update on the slowdown in the world's second biggest economy.

The Shanghai Composite Index crept up 0.1 percent to 2,074.53 and the Shenzhen Composite Index edged up 0.1 percent to 833.05. The Chinese benchmarks seesawed between gains and losses after an earlier report showed October inflation eased to 1.7 percent, giving room for more stimulus.

"Markets may stabilize and possibly rebound on Chinese data for October, which we expect to show acceleration of output amid muted price pressures," strategists at Credit Agricole CIB wrote in a research note.

Australian stocks fell after the country's central bank said in a quarterly report it was trimming growth forecasts as mining companies scale back investment plans because of declining iron ore and coal prices and the strong currency.

On Wall Street, the Dow closed down nearly 1 percent to 12,811.32, bringing its two-day loss to 434 points. The Standard and Poor's 500 index fell 1.2 percent to 1,377.51 and the tech-heavy Nasdaq composite slipped 1.4 percent to 2,895.58.

In currencies, the euro weakened to $1.2774 from to $1.2750 late Thursday. The dollar strengthened to 79.51 Japanese yen from 79.38 yen.

Crude oil for December delivery was up 21 cents to $85.30 in electronic trading on the New York Mercantile Exchange. The contract rose 65 cents to close at $85.09 on Thursday.