Asia stocks down on Greek debt deal doubts

November 2, 2011 - 10:45 PM

BANGKOK (AP) — Asian markets fell Thursday, as a European deal to bail Greece out of a massive financial mess appeared to be on the verge of unraveling.

Hong Kong's Hang Seng index fell 2.2 percent to 19,301.50. South Korea's Kospi lost 1.3 percent to 1,872.87. Australia's S&P ASX 200 lost 0.7 percent to 4,155.10.

Japanese markets were closed for a national holiday.

Greece's prime minister unexpectedly announced Monday that he would call a national vote on the European bailout plan that entails painful tax increases and drastic welfare cuts in exchange for massive aid to keep his debt-ridden nation solvent.

The vote will likely take place Dec. 4 — unless the government of Prime Minister George Papandreou falls beforehand.

"Ahead of the vote markets will remain highly nervous and risk aversion will remain elevated. Consequently risk assets are set to face further pressure," Credit Agricole CIB said in a research note.

Should Greek voters reject the austerity plan, it could lead to a messy default on the country's debt that would likely cause massive losses for banks that hold Greek bonds — and possibly spark a wider financial crisis that could send the European Union into recession.

Papandreou is scheduled to explain his stance when he meets with leaders of the Group of 20 nations at a summit in France on Thursday and Friday.

In the U.S., Wall Street ended higher after an increase in hiring by private companies helped lift stock prices.

Automatic Data Processing said company payrolls rose by 110,000 in October, more than economists had expected. ADP also revised its survey results for September higher. Investors see ADP's report as a precursor to the government's broader employment report, which is due out Friday.

The Federal Reserve said Wednesday the economy was likely to expand modestly over the next two years. But Fed Chairman Ben Bernanke cautioned that the pace of economic growth will likely be "frustratingly slow." The Fed said it would not take any more steps to help the economy for now, but it left open the possibility of more steps later.

The Dow Jones industrial average gained 1.5 percent to close at 11,836.04. The Standard and Poor's 500 rose 1.6 percent to 1,237.90. The Nasdaq composite gained 1.3 percent to 2,639.98.

Benchmark crude for December delivery was down $1.05 at $91.46 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 32 cents to settle at $92.51 in New York on Wednesday.