Asian markets slump after US debt warning

BANGKOK (AP) -- Standard & Poor's warning that it could downgrade the United States' credit rating sent Asian stock markets tumbling on Tuesday.

Oil prices dropped below $107 a barrel after S&P lowered its long-term outlook for the U.S. government's fiscal health from "stable" to "negative." The dollar was higher against the euro but slipped against the yen.

Japan's Nikkei 225 index slid 1.1 percent to 9,456.10 and Hong Kong's Hang Seng index was down 1.3 percent to 23,524.80. South Korea's Kospi gave up 0.4 percent to 2,130.27. Benchmarks in mainland China, Singapore, Taiwan, Australia, New Zealand and the Philippines also lost ground.

"Standard & Poor's decision ... took markets by surprise," DBS Bank Ltd. in Singapore said in a report.

"The rest of the world needs to come to terms that the US can no longer sustain its role as the consumer of last resort for the global economy indefinitely," DBS said.

The warning from S&P on Monday sent Wall Street on its steepest slide in a month. S&P said there is a 33 percent chance it would lower the country's credit rating from AAA in the next two years if Washington fails to pare the country's debts.

If the credit rating was lowered, the U.S. government would have to pay more to borrow money when it issues bonds.

Since the federal government's borrowing rates are used as a benchmark for nearly all kinds of debt, many borrowers would also pay higher rates, including companies, homeowners and credit card users. That would crimp spending in the world's biggest economy and ripple around the world.

The Dow Jones industrial average, the S&P 500 index and the Nasdaq composite all had their sharpest falls since March 16. The Dow fell 1.1 percent to close at 12,201.59. The Standard & Poor's 500 fell 1.1 percent to 1,305.14. The Nasdaq composite also fell 1.1 percent to 2,735.38.

Japanese stocks continued to struggle in the aftermath of the country's worst-ever earthquake on March 11. Toyota Motor Corp., which experienced severe production disruptions due to supply shortages, was down 2.8 percent.

The quake and ensuing tsunami destroyed much of Japan's northeastern coast, crippling a nuclear plant that has leaked radiation ever since. Shares of the plant's operator, Tokyo Electric Power Co. or TEPCO, have virtually disintegrated since the disaster.

On Tuesday, TEPCO shares plunged another 6.2 percent after officials determined that radiation levels were still far too high for repair crews to go inside the plant.

Meanwhile, shares of South Korea's leading steelmaker, POSCO, rose 1.5 percent after the company said it will raise the prices of its steel products due to a recent increase in raw material prices, the Yonhap News Agency reported.

Higher steel prices were seen as likely hurting auto, machinery and shipbuilding sectors by increasing their costs. Hyundai Heavy Industries Co., Korea's leading shipbuilder, dropped 1.5 percent. Hitachi Construction Machinery Co. slumped by 2.7 percent.

Shares of Henan Shuanghui Investment and Development Co., which resumed trading Tuesday on the Shanghai Composite Index after a one-month suspension following a food scandal, dropped by the daily limit of 10 percent, Xinhua news agency reported.

Trading had been suspended after allegations surfaced that tainted pork was found being sold by Shuanghui Group, China's largest meat processor. The pork was combined with clenbuterol, a banned drug that causes pigs to convert fat to muscle quickly.

Clenbuterol is illegal because it can cause nausea, dizziness, headaches and heart palpitations in humans, but pig farmers like to use it because it helps yield more lean meat, which is costlier than fatty meat.

Benchmark crude for May delivery was down 53 cents to $106.59 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.54, or 2.3 percent, to settle at $107.12 on Monday.

In currencies, the euro fell to $1.4222 from $1.4234 late Monday in New York. The dollar slipped to 82.44 yen from 82.71 yen.