Eurozone debt fears continue to hammer Asia markets

Sentiment remained fragile despite an EU-IMF rescue package worth almost a trillion dollars designed to prevent the Greek crisis from spreading, as fears grew that the single currency is at risk of collapse.

The euro fell to as low as 1.2243 dollars in Tokyo trade — its lowest since April 2006 — from 1.2358 in New York Friday. It later recovered slightly to 1.228 in European trade.

Tokyo shares dived 2.17 percent, or 226.75 points, to close at 10,235.76, while Sydney plunged 3.12 percent, or 143.9 points, to 4,467.2.

Hong Kong tumbled 2.14 percent, or 430.23 points, to 19,715.20 and Shanghai plummeted 5.07 percent to a one-year low, losing 136.70 points to 2,559.93. Hong Kong and Shanghai were also weighed down by fears of credit-tightening measures on the mainland to cool property prices.

The eurozone rescue plan was initially greeted with optimism but has since failed to reassure sliding markets, with Europe's growth prospects stymied by belt-tightening measures announced by Spain, Portugal, Italy, and France.

"Concerns that severe fiscal austerity in the eurozone will crush growth in the region continue to weigh" on the euro, said John Kyriakopoulos of National Australia Bank in Sydney.

"Investors are questioning if tightening fiscal spending really is the right thing to do because it would have a negative impact on the economy," said Hideaki Inoue, chief forex manager at Mitsubishi UFJ Trust and Banking Corp. "The entire economic outlook is becoming increasingly grim."

Regional markets followed European and Wall Street stocks lower. On Friday the Dow dropped 1.51 percent on escalating fears for the health of the eurozone.

"While a financial safety net is in place (in the eurozone), that doesn't remove the considerable economic concerns that burden that region," Jamie Spiteri, head of trading at Shaw Stockbroking in Sydney told Dow Jones Newswires.

Stocks in Japanese exporters extended losses, their overseas profits threatened by the euro's weakness. Sony was down 4.50 percent and Kyocera lost 2.87 percent.

"The market has no confidence in the euro," Mizuho Corporate Bank market economist Daisuke Karakama said, noting the single currency was lower even though there was no fresh news to drive it down.

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