Fallout from the eurozone debt crisis has sent shock waves across world markets with impact from the news that Spain has received a credit downgrade along with Greece and Portugal reaching Asian economies.
Financial research company Standard and Poor's cut Spain's long-term debt rating by one notch on Wednesday, a day after it sent shockwaves through the markets by relegating Greek bonds to "junk" status and downgrading Portugal by two notches.
The International Monetary Fund has said that confidence in the 16 nation euro area was at risk following Spain's credit rating being downgraded and the euro remaining at one year lows.
Europe's debt crisis deepened after Spain was slapped with a credit downgrade, and pressure mounted for urgent approval of a giant bailout for Greece that could run to 120 billion euros ($A171 billion).
Impact on Asian Economies
This news has caused Asian investors to become wary, with Hong Kong's stock market falling 0.11 percent, Seoul down 0.60 percent, whilst Sydney's market has gone down 0.65 percent off the back of the announcements.
Oil prices have also slipped slightly in Asian trade losing some of their steam as investor's awaited further news on Europe's debt crisis and its impact on the commodity.
"It's pretty quiet in terms of news at the moment. When... there is some new development in the Greece situation, then the market could go either way," Clarence Chu, a Singapore-based trader with Hudson Capital Energy told AFP.
The euro hovered around 1.32 dollars in Asian trade as a credit rating downgrade of Spain amid Europe's debt crisis dampened a fleeting rally for the currency, dealers said.
Amidst the markets stalling the IMF has warned that Asian economies risk overheating as high capital inflows fan inflation and raise the danger of asset bubbles.
In its latest regional report, the IMF urged Asian economies to return to "more normal" monetary policies after the global downturn and increase their exchange rate flexibility.
ANZ CEO worried about global economy
The head of Australian banking giant ANZ voiced renewed fears about the global economy Thursday, describing Europe as a "mess", despite a steep rise in profits.
Chief executive Mike Smith, announcing that first-half profits were up 36 percent, said there was concern that sovereign debt issues plaguing Europe could spread, affecting equity and credit markets.
"I am still quite worried about the global economy ... Europe is a mess," Smith said.
"I think the uncertainty has continued and is possibly going to get worse because I think the contagion issue is now very real," he added.
Smith was speaking as European countries mulled a massive bailout for debt-stricken Greece, while Spain was slapped with a credit downgrade, roiling financial markets.
Australia's big banks rode out the financial crisis in good shape thanks to stringent lending practices, helping the country become the only advanced economy to avoid recession during the financial crisis.
European Union "must prevent a fire"
Greek Prime Minister Konstandinos Karamanlis has said that the European Union "must prevent a fire" from engulfing the regional and world economy.
Greece has said it needs emergency loans from the EU and IMF by May 19 to avoid defaulting on its debts.
Hopes for a bailout running up to 120 billion euros (158 billion dollars) were raised Wednesday as Germany signalled it was more willing to help Greece, with Chancellor Angela Merkel saying rescue talks must be accelerated.
Spain, with an economy five times the size of Greece's, appealed to those investors.
"I want to send a message of confidence to the population and of calm to the markets," Deputy Prime Minister Maria Teresa de la Vega said, insisting that Spain was cutting its debts.
The Greek crisis has snowballed in recent months and is seen by many as a sign of things to come for other highly-indebted economies in Europe.
The crisis is at a crunch point as Greece has said it needs emergency loans by May 19 to avoid defaulting on its debts.
The Greek government also faces growing domestic discontent, with a wave of strikes by radio engineers and teachers erupting on Wednesday and a general strike planned for May 5.
