Asia stocks slump as investors rush to sidelines; Nikkei sinks 1.02%

Investing.com - Asian stock markets tanked in early trading Thursday as investors sold equities and ran to the sidelines to await the outcome of a key summit in Europe later this week.

During late-morning Asian trading, Hong Kong's Hang Seng Index was down 1.19%, Australia's S&P/ASX200 was off 0.36%, while Japan’s Nikkei 225 Index slumped 1.02%.

Europe has served as the weather vane for markets all week, as investors await the outcome of a key summit that wraps up in Brussels on Friday.

France and Germany have proposed adding sharper teeth to punishments applied to member nations who break deficit limits, and the summit will hopefully lay groundwork for that and other fiscal policies the continent needs to firewall its debt crisis from spreading.

Optimism that the continent's leadership was mustering the political will to tackle the crisis had buoyed stocks and other assets throughout the week, even amid warnings from the U.S. Standard & Poor's ratings agency that failure to do so could result in widespread credit downgrades for 15 European countries.

S&P said no one was immune and threatened to strip Germany, France, the Netherlands, Austria, Finland and Luxembourg of their coveted AAA ratings.

However, reports on Wednesday surfaced that Germany had grown a little skeptical over the timing of reaching such agreements, fraying already edgy market nerves and sending equities investors selling and running for the sidelines.

Furthermore, the European Central Bank was set to address interest rates later Thursday, and the markets were expecting monetary policy authorities to slash benchmark lending rates by 25 basis point to a real 1.00%.

ECB language suggesting greater risk of a recession striking the continent, a foregone conclusions for many market watchers, could rattle equities markets as well.

Japan's Leading Indicators Index, a composite of 12 economic indicators that measures the pulse of the country's economy, came in at 91.5 in October, slightly below expectations of around 91.8.

China's leading stocks were off, including Li & Fung, down 3.83%, PetroChina, down 1.99% and Swire Pacific A, down 1.96%.

In Australia, leading losers included Southern Cross Media, down 5.56%, Fairfax Media, down 4.14% and Caltex Australia, down 3.67%.

Australian unemployment rates for November hit 5.3%, slightly above forecasts calling for 5.2% rates.

In New Zealand, The Reserve Bank of New Zealand held interest rates at 2.50%.

European stocks futures were also lower, with investors taking a wait-and-see attitude ahead of upcoming Central Bank decisions and economic summit on Friday.

France’s CAC 40 futures were down 0.11%, the FTSE 100 futures fell 0.39%, while Germany's DAX futures were down  0.57%.  

The Bank of England was expected to make its monthly decision on interest rates  on Thursday, amid market expectations for no change at 0.50%.

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