World stocks fall as Spain woes intensify

BANGKOK – Investors unnerved by Spain's worsening financial condition and a report that China has no plans for a major economic stimulus dragged world stock markets lower Wednesday.

Worries about Europe's financial stability worsened after a ratings agency slapped Spain with a downgrade Tuesday because it may have trouble repaying its debt amid slowing growth and rising unemployment. Spain has a 24.4 percent jobless rate and is battling its second recession in three years.

Traders are also concerned that Europe's fifth-largest economy may struggle to save its banking sector, worsening the region's chronic debt crisis. Jitters have worsened since Friday, when Bankia, Spain's fourth-largest lender, said it needed €19 billion ($23.8 billion) in state aid.

Markets also reacted to a microblog posting by China's official Xinhua News Agency that said Tuesday the government had denied reports of plans for a massive new stimulus, said Dickie Wong, executive director of Kingston Securities Ltd. in Hong Kong.

The report adds "pressure to the local stocks markets" on top of fears of sputtering Chinese growth, he said.

However, that report was later deleted and no other Chinese media outlets carried it. Meanwhile, Chinese leaders have recently indicated their intention to implement limited measures to help rev up the economy.

European stocks opened lower. Britain's FTSE 100 fell 1.4 percent to 5,317.22. Germany's DAX lost 1 percent to 6,336.06 and France's CAC-40 shed 1.3 percent at 3,044.22. Wall Street headed to a lower opening, with Dow Jones industrial futures down 0.6 percent to 12,503 and S&P 500 futures losing 0.7 percent to 1,323.60.

Stocks stumbled earlier in Asia. Japan's Nikkei 225 index fell 0.3 percent to close at 8,63319 as Europe's troubles sent the yen higher against the euro. That hurts Japanese exporters by making their goods more expensive.

Hong Kong's Hang Seng tumbled 1.9 percent to 18,690.22 and South Korea's Kospi was down 0.3 percent to 1,844.86.

Australia's S&P/ASX 200 lost 0.5 percent to 4,094.20 while benchmarks in Singapore, Taiwan, and Thailand also fell. New Zealand rose marginally and mainland Chinese shares were mixed.

Meanwhile, Spain's woes have magnified fears of a possible debt implosion in Europe's weaker economies — starting with Greece, which will run out of money in the coming days without an emergency loan.

Negative sentiment persisted despite polls that suggested an upcoming election in Greece might result in a government willing to implement a highly unpopular austerity program.

Sticking to its austerity commitments will enable Greece to qualify for an urgently needed international bailout to avoid defaulting on its massive debts and remain in the euro currency union.

"Spain remains the key worry for the eurozone debt crisis, eclipsing optimism in Greece that the pro-bailout conservatives are leading the polls ahead of next month's election," said analysts at DBS Bank Ltd. in Singapore.

Among individual stocks, shares of Olympus Corp. rose 4 percent following a report in Asahi Shimbun newspaper that the camera and medical equipment maker is in talks about a possible tie-up with either Panasonic Corp. or Sony Corp., Kyodo News Agency said. Sony fell 2.4 percent and Panasonic was down 3 percent.

Benchmark oil for July delivery was down 98 cents to $89.78 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 10 cents to settle at $90.76 in New York on Monday.

In currencies, the euro fell to $1.2439 from $1.2487 late Tuesday in New York. The dollar slipped to 79.13 yen from 79.51 yen.