Asian stocks down as Europe debt crisis festers (AP)

BANGKOK ? Asian stock markets fell Thursday over renewed fears that European leaders are struggling to agree on a rescue plan to resolve the continent's debt crisis.

Oil prices hovered below $86 per barrel while the dollar rose against the euro but slipped against the yen.

Japan's Nikkei 225 index fell 1 percent to 8,682.47. Hong Kong's Hang Seng slid 2 percent to 17,949.76 and South Korea's Kospi lost 1.3 percent to 1,831.56. Benchmarks in Singapore, Taiwan, mainland China, Indonesia and Australia were also lower.

Worries that Europe's troubles could get worse have kept markets on edge for weeks. The Greek government is widely expected to go through some kind of default or restructuring of its debt, which could deliver a severe blow to an already weak European economy.

U.S. stocks sank after a report that French President Nicolas Sarkozy said Germany and France were in a deadlock over how to expand the region's emergency rescue fund. Expectations are changing rapidly about what to expect from a summit this weekend among international lenders and European leaders.

"Everyone is just waiting for the weekend summit of European leaders and how they are going to propose a way out of the Europe debt crisis," said Lee Kok Joo, head of research at Phillip Securities in Singapore. "There's not much optimism for a resolution since conflicting views are coming out of France and Germany," he said.

Banking shares across Asia fell, a reflection of nervousness over the possibility that a Greek default could unleash a financial crisis similar to the one that felled Lehman Brothers in 2008.

National Bank of Australia lost 1.9 percent, South Korea's Shinhan Financial Group tumbled 3.4 percent and Japan's Mitsubishi UFJ Financial Group was 0.3 percent down. Industrial & Commercial Bank of China, the world's largest bank by market value, fell 1.5 percent.

Shares in metals and raw materials fell on dropping commodities prices. Australia's Newcrest Mining plunged 6.5 percent, Hong Kong-listed PetroChina Co. lost 4.9 percent and Zijin Mining Group, China's largest gold miner, plummeted 8.2 percent.

In the U.S., the government said homes were built in September at the fastest pace in 17 months, a hopeful sign for the struggling housing market. Additionally, consumer prices increased more slowly in September than the month before.

But the encouraging data was offset by a gloomier view of the economy from the Federal Reserve. A report known as the Beige Book found that businesses in some areas of the country were holding back spending because they were unsure of the economic outlook.

The Dow closed at 11,504.62, a loss of 0.6 percent. The Standard & Poor's 500 index fell 1.3 percent to 1,209.88. An earnings report by Apple that fell short of forecasts helped send the Nasdaq composite down 2 percent to 2,604.04.

Benchmark crude for November delivery was down 42 cents at $85.86 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.24 to settle at $86.29 in New York on Wednesday.

In currencies, the euro fell to $1.3701 from $1.3747 late Wednesday in New York. The dollar slipped to 76.68 yen from 76.78 yen.

Source: http://us.rd.yahoo.com/dailynews/rss/stocks/*http%3A//news.yahoo.com/s/ap/20111020/ap_on_bi_ge/world_markets

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