Asia stocks drop as EU contagion fears grow; Nikkei down 0.9%

Investing.com – Asian stock markets were broadly lower on Wednesday, as investors dumped riskier assets amid growing fears that the euro zone’s sovereign debt crisis will spread to the region’s core economies.

During late Asian trade, Hong Kong's Hang Seng Index tumbled 2.4%, Australia’s ASX/200 Index shed 0.89%, while Japan’s Nikkei 225 Index slumped 0.92%.

Appetite for riskier assets was dented after Italy's 10-year bond yields rose above 7% on Tuesday, a level widely viewed as unsustainable for long-term borrowing, while Spanish 10-year yields rose above 6% for the first time since the European Central Bank started to buy the country's bonds in August.

Adding to nervousness over the region’s debt crisis, French government debt came under pressure, with the 10-year yield rising to 3.69%, the highest since early May.

Japanese exporters with high exposure to Europe traded lower, with consumer electronics giant Sony tumbling 3.3%, while automakers Honda and Nissan saw shares drop 2.15% and 2.4% respectively.

Japanese lenders contributed to losses, with investment banks Nomura Holdings and Daiwa Securities plunging 4.35% and 4.6% apiece, amid concerns over their exposure to European sovereign debt.

On the upside, scandal-hit Olympus rallied for the third consecutive day, jumping 15.6% amid speculation the company will avoid delisting from the Tokyo Stock Exchange. The stock has gained nearly 38% in the past three sessions.

Elsewhere, in Hong Kong, shares in property developers led losses after the International Monetary Fund warned about dangers of a Hong Kong property bubble in a report earlier in the day.

Hang Lung Properties dropped 3.2%, Sino Land Properties fell 2.75%, while real estate developers  Henderson Land Development and China Overseas Land & Development slumped 3.55% and 4.7% respectively.

Hong Kong-based exporters also contributed to losses, with shares in Esprit Holdings, which counts Europe as its largest market tumbling 4% and Li & Fung shares dropping 2.7%.

Meanwhile, the outlook for European stock markets was downbeat. The EURO STOXX 50 futures pointed to a loss of 0.5%, France’s CAC 40 futures shed 0.4%, the FTSE 100 futures slipped 0.5%, while Germany's DAX futures indicated a drop of 0.9%.

Later in the day, the euro zone and the U.S. were to release official data on consumer price inflation, while the U.S. was also to produce data on industrial production.