HONG KONG: Asian markets tumbled and the euro slumped to its lowest level against the yen in almost 12 years on Monday as Spain's debt crisis deepened, raising concerns over the wider eurozone.
With borrowing costs hitting the danger levels that forced Ireland, Greece and Portugal to seek a bailout, investors are concerned that Spain, one of the eurozone's biggest economies, will also have to call for help.
Hong Kong led the losses, diving 2.8 percent by the afternoon, while Shanghai slipped 1.21 per cent.
Sydney finished 1.67 per cent lower, Tokyo slumped 1.86 per cent, and Seoul lost 1.84 per cent.
Market players were spooked by reports that one of Spain's indebted regions, Valencia, would ask the central government for financial support, while officials in Madrid warned that the economy would likely contract through 2013.
"Europe is definitely a drag on risk assets again this week as investors are worried that Spain's debt burden could be bigger than expected and that a full bailout may be required," said Peter Esho at CityIndex in Australia.
The worries sent Spanish borrowing costs to a euro-era record level, with the 10-year bond yield climbing to 7.24 per cent, while the euro at one point fell to 94.61 against the yen, its lowest level since November 2000.
In Tokyo trade the euro, which also tumbled Friday amid the Spanish woes, bought 94.48 yen, compared with 95.38 late Friday in New York.
"It's not the kind of situation where fears are just going to fade away, since the required amount of aid that Spain will need is likely to mount given the increasing needs of local governments," Rakuten Securities senior market analyst Masayuki Doshida told Dow Jones Newswires.
European leaders on Friday agreed to grant Spain's banks bailout cash of up to 100 billion euros but despite this there are fears that the country will need extra cash to help service its debts.
The soaring yields on 10-year bonds come as unemployment sits at 24 per cent and the government tries to implement further austerity measures.
Without better economic news the country could lose access to debt markets, leading it to a bailout, which some analysts have said could cost up to $500 billion.
The euro was also down at two-year lows of $1.2102, from $1.2152 on Friday. The dollar bought 78.06 yen, compared with 78.48 yen.
On oil markets New York's main contract, light sweet crude for September delivery, sank $1.47 to $90.36 a barrel while Brent North Sea crude for delivery in September dropped $1.42 cents to $105.41.
Gold was at $1,574.20 an ounce at 0635 GMT, from $1,581.20 on Friday.
In other markets:
-- Wellington closed flat, edging up 1.66 points to 3,465.36.
Telecom rose 1.2 per cent to NZ$2.54 and Fletcher Building fell 0.3 per cent to NZ$5.81.
-- Taiwan fell 1.90 per cent, or 135.95 points, to 7,028.73.
Taiwan Semiconductor Manufacturing Co shed 3.13 per cent to Tw$74.3 while Hon Hai Precision lost 3.35 per cent to Tw$86.6.
