Asian markets drop on European and Chinese fears

Asian markets fell on Thursday as the daily seesawing back and forth, one day to the next by global stock exchanges continued. Weak trading overnight in the U.S. combined with a credit downgrade for Spain ( EWQ , quote ) and a revised outlook downward for the Chinese economy ( FXI , quote ) were the main culprits as to why Asian stocks moved lower.

Worries cloud the horizon in Shanghai

As well, the dearth of significant macroeconomic data from Asia prevented an organic reaction from Asian markets against the bad news originating in Europe, and resigned Asian markets to remain largely correlated to action and opinions from elsewhere around the globe.

Overnight, the Dow Jones dropped in afternoon trading, finishing down 77 points, or .62%, after spending most of the day roughly flat, performing remarkably well considering the news earlier in the day that U.S. retail spending dipped 0.2% for the month of May. However, around 2 p.m., renewed fears over the stability of a euro zone country arose once again. This time, concerns over an Italian debt issuance and its rising yields led American investors to take cover. Taking their cues from American exchanges, Asian markets this morning followed suit.

As well, after American markets closed on Wednesday, Moody’s cut the sovereign debt rating of Spain to the very edge of junk status . Combined with general concerns about the Greek election, it is not a shock that European fears sent Asian markets lower.

Of the major Asian markets, Hong Kong’s Hang Seng ( EWH , quote ) and the Shanghai Composite fared the worst. In addition to the abovementioned European concerns, Chinese exchanges were adversely affected by a note issued by Crédit Suisse pertaining to the Chinese economy. The Swiss outfit cut its outlook on the Chinese economy for both this year and next, claiming that investors are looking for growth surprises but that “(g)rowth surprises around the world are not frequent these days.” Both Shanghai and the Hang Seng ended about a percent lower.

Unsurprisingly, the companies that struggled the most in Hong Kong today were those with European exposure , like Esprit, and those with major operations in the mainland, like China Minsheng Banking Corp.

Elsewhere, both the Nikkei 225 ( EWJ , quote ) and Taiwan’s Taiex ( EWT , quote ) dropped roughly 0.2%, as a result of the global concerns outlined above . The only major exchange to finish higher was South Korea’s Kospi ( EWY , quote ). However, this was largely the result of a late surge related to options expiration , and not the result of positive news from the South Korean economy. Because the late move upwards was mostly artificial, it is unlikely that EWY will significantly outperform its Asian ETF peers in Thursday trading in New York.