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Asian stocks fall as skepticism grows over EU plan to fix massive debt crisis
BANGKOK (AP) ' Asian stock markets fell Tuesday as criticism by ratings agencies sparked wariness over a historic plan by the European Union to bind their economies closer together in an effort to fix a massive debt crisis.
Japan's Nikkei 225 fell 1.4 percent to 8,529.72. South Korea's Kospi gave up 1.7 percent to 1,868.48.
Markets rallied on Friday, when the EU adopted a new fiscal pact meant to prevent a repeat of the financial fiasco that is now sweeping across countries that use the euro.
But that optimism dried up Monday, when credit rating agencies Moody's and Fitch both said the deal was insufficient and would not materially ease debt pressure in Europe. Moody's warned that it will review all EU governments' ratings for possible downgrades in early 2012.
"Following the comments from Moody's and Fitch, we expect to hear from S&P again soon for some post-summit comments. We already know S&P has France on ratings watch and may strip it of its AAA credit rating," Stan Shamu of IG Markets in Melbourne said in a report.
Under the deal, all 17 countries that use the euro agreed to allow a central European authority to oversee their future budgets and impose tighter controls on spending. They also agreed to automatic penalties if countries spend too much.
The fiscal pact also calls for the launch of a permanent bailout fund for euro nations in 2012 ' a year ahead of schedule ' and an additional euro200 billion ($267 billion) to the International Monetary Fund for a separate emergency fund for countries in crisis. National central banks will provide the money to the IMF.
Analysts warn that the deal doesn't help cut existing debt, which has caused Greece, Ireland and Portugal to need bailouts and is threatening Italy and Spain.
Wall Street also traded lower. The Dow closed down 1.3 percent at 12,021.39, a loss erased nearly all of the Dow's gains from last week. The S&P 500 lost 1.5 percent to close at 1,236.47. The Nasdaq composite index dropped 1.3 percent to 2,612.26.
Benchmark oil for January delivery fell 7 cents to $97.70 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.64 to finish at $97.77 per barrel on the Nymex on Monday.
In currency trading, the euro fell to $1.3182 from to $1.3186 late Monday in New York. The dollar rose to 77.93 yen from 77.91 yen.