BANGKOK ? Asian stock markets fell Thursday as Japanese business confidence dropped and higher borrowing costs for Italy sparked worries over the ability of European governments to get a grip on their ever-burgeoning debts.
Benchmark oil rose to near $96 per barrel after a big slide the day before while the dollar fell against the euro and the yen.
Japan's Nikkei 225 index shed 1.1 percent to 8,423.87. South Korea's Kospi lost 1.8 percent to 1,823.53 and Hong Kong's Hang Seng tumbled 1.9 percent to 18,014.70. Australia's S&P/ASX 200 dropped 1.1 percent to 4,143.20. Benchmarks in Singapore, Taiwan, and mainland China were also lower.
In Japan, confidence at major manufacturers fell over the last quarter. The Bank of Japan's "tankan" survey of business sentiment fell to minus 4.
The figure represents the percentage of companies saying business conditions are good minus those saying conditions are unfavorable, with 100 representing the best mood and minus 100 the worst.
Japan's strong yen has hit multiple historic highs this year against the dollar, making business conditions difficult for Japan's export-reliant economy.
Some of the gloom was offset, however, by preliminary manufacturing figures showing that China's manufacturing contracted at a slower rate in December. HSBC's purchasing manager's index for December stood at 49.0, up from 47.7 in November. Any number below 50 indicates a contraction in manufacturing activity.
But the figure didn't raise hopes that China might ease its monetary policy anytime soon.
"I don't think there will be an interest rate cut in the short-term," said Dickie Wong, executive director of research at Kingston Securities Ltd. in Hong Kong. "Sentiment is really bad in China."
On Wall Street, stocks plummeted Wednesday amid a growing sense that Europe's leaders have failed to contain that region's debt crisis.
Since European leaders reached an agreement to rein in future government budget deficits last week, investors and credit rating agencies have criticized the deal for failing to address current problems.
Italy had to pay higher borrowing rates in its last bond auction of the year Wednesday. The third-largest economy among the 17 nations the use the euro paid 6.47 percent interest to borrow 3 billion euros ($3.95 billion) for five years ? up 0.17 percentage point from last comparable auction ? and the highest rate since the euro came into existence in 1999.
The higher rates make it more expensive for Italy to borrow money and reflect rising doubts that the country will be able to repay its debts.
"I cannot say it was really bad, but the yield is historically high. This says markets believe that European nations and their economies are still sluggish," said Wong.
Italy is one of a handful of European countries whose debt loads have raised the risk of default ? an event that could have catastrophic consequences for global banking, cause the euro currency to collapse and spark a global recession.
Oil prices, which plunged more than $5 on Wednesday, drove down energy-related shares. South Korea's S-Oil Corp. fell 4.7 percent. Hong Kong-listed China National Offshore Oil Corp. dropped 4.6 percent.
Asian banking shares fell on the heels of a downgrade by Fitch Ratings of five major European commercial banks and cooperative banking groups. Hong Kong-listed Industrial & Commercial Bank of China, the world's largest bank by market value, fell 2.6 percent. Australia's Westpac Banking Corp. fell 1.8 percent.
Falling gold prices hit shares tied to the value of the precious metal. Zijin Mining Group, China's largest gold miner, fell 4.2 percent. Australia's Newcrest Mining was 2.8 percent down.
The Dow Jones industrial average fell 1.1 percent to close at 11,823.48 on Wednesday. The Standard & Poor's 500 index fell 1.1 percent to 1,211.82. The Nasdaq fell 1.6 percent to 2,539.31.
Benchmark oil for January delivery was up 76 cents at $95.71 a barrel in electronic trading on the New York Mercantile Exchange. The contract declined $5.19 to finish at $94.95 per barrel on the Nymex.
In currency trading, the euro rose to $1.2986 from $1.2977 late Wednesday in New York. The dollar slipped to 78.05 yen from 78.07 yen.
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