Worries about Europe's banking woes and debt problems in the US dragged global stock markets lower on Monday.
The results of stress tests on European banks that were released after the close of trading Friday overshadowed the start of this week's trading.
The results did little to reassure investor confidence in the continent's shaky financial sector, revealing that eight of 90 European banks flunked tests aimed at revealing how they would fare in another recession. Another 16 barely passed.
Ahead of an emergency meeting of EU leaders later this week, investors are growing more worried that Europe's debt crisis will spread to Italy and Spain.
Investors are also unsettled by the inability of US politicians to work out a deal to avoid a debt default before a deadline that is just two weeks away.
'Looking ahead, sovereign debt worries in the US and Europe and a pickup in second-quarter US earnings data are going to compete for traders' attention,' said Ben Potter, a research analyst at IG Markets in Melbourne, Australia. 'The only real certainty in the coming days is that there is likely to be volatility as the market grapples with these major issues.'
Francis Lun, managing director of Lyncean Holdings in Hong Kong, said that market reaction is 'quite negative' to the stress test results. 'It really shows that it would be a long time before Europe can solve its problem,' he said.
In early European trading, the FTSE 100 index fell 0.8 per cent to 5,793.73 and France's CAC-40 dropped 1.3 per cent to 3,678.26. Germany's DAX slid 1.1 per cent to 7,137.13.
US stocks were poised to fall. Dow futures were down 0.6 per cent to 12,380.00 while S&P 500 futures were down 0.6 per cent to 1,306.30.
In Asia, South Korea's Kospi slipped 0.7 per cent to close at 2,130.48 and Australia's S&P/ASX 200 shed less than 0.1 per cent to 4,539.90. Hong Kong's Hang Seng fell 0.3 per cent to finish at 21,804.75.
Mainland Chinese shares edged lower amid concerns over inflation will remain high in the coming few months, analysts said.
The Shanghai Composite Index lost 0.1 per cent to close at 2,816.69 and the Shenzhen Composite Index dropped less than 0.1 per cent to end at 1,232.54.
'The market will keep on being unstable. There could be a rally this week, however, it cannot last long as there is not enough power to support it,' said Cai Dagui, an analyst in Ping'an Securities, based in Shenzhen.
Elsewhere, benchmarks in Taiwan, Singapore and New Zealand also fell. Markets in Japan were closed Monday for a national holiday.
Source : New Age
