HONG KONG - Asian markets tumbled on Monday and the euro sank as eurozone fears returned on news that Cyprus was planning to tax bank depositors as part of a controversial bailout.
Wall Street also provided a weak lead, with the Dow seeing its first loss after a 10-day rally as data pointed to ongoing softness in the US economy.
Tokyo fell 2.71 per cent, or 340.32 points, to end at 12,220.63, Sydney slipped 2.05 per cent, or 104.8 points, to 5,015.4, a two-week low, while Seoul ended 0.92 per cent lower, sliding 18.32 points to 1,968.18.
Hong Kong lost 2.00 per cent, or 449.75 points, to end at 22,083.36 and Shanghai shed 1.68 per cent, or 38.39 points, to 2,240.02.
Investors have been spooked by news that Cyprus agreed to a levy of up to 10 per cent on bank depositors as part of a deal with fellow eurozone countries and international creditors in order to qualify for a US$13 billion (S$16.3 billion) bailout.
Deposits of more than 100,000 euros (S$162,000) will be hit with a 9.9 per cent charge and 6.75 per cent for anything below that threshold. The proposal must still be passed by parliament.
President Nicos Anastasiades said in a televised address Sunday the tax was the "least painful" option for the recession-hit island and vowed to try to persuade the eurogroup to "limit the impact on small depositors".
While bank customers have voiced dismay and anger at the plan, global markets were jolted amid fears it could reignite the eurozone debt crisis and hit confidence in other troubled countries such as Spain and Italy.
In early European trading shares in London, Paris and Frankfurt slumped between 1.5 per cent and 2.0 per cent.
"The feeling is that the euro crisis could be back and that you could see full on contagion, that's why you're seeing the market reaction today," said Shane Oliver, head of investment strategy and chief economist at Amp Capital in Sydney.
"But I suspect that we are going to hear reassurances from other countries that Cyprus is different and that this plan will not be put in place elsewhere," he told Dow Jones Newswires.
On currency markets the euro fell to US$1.2933 and 122.75 yen from US$1.3075 and 124.61 yen in New York Friday.
The dollar dropped to 94.88 yen from 95.26 yen, although it received some measure of support from expectations that the new leaders of the Bank of Japan will unveil a fresh round of monetary easing to jumpstart the economy.
The Dow on Wall Street finished down 0.17 per cent, the first time in nine days it did not set a fresh record, while the S&P 500 lost 0.16 per cent after moving within a whisker of its own all-time high. The tech-heavy Nasdaq dropped 0.30 per cent.
Dealers went into sell mode after the University of Michigan Consumer index took a surprising dive to 71.8, its lowest since the end of 2011 and down from 77.6 in February. Analysts had expected a gain.
Oil prices fell, with New York's main contract, light sweet crude for delivery in April, dropping $1.18 to US$92.27 a barrel in the afternoon and Brent North Sea crude for May delivery shedding $1.50 to US$108.32.
Gold was at US$1,604.62 an ounce at 0810 GMT compared with US$1,592.60 late Friday.
In other markets:
- Taipei fell 1.47 per cent, or 116.15 points, to 7,811.34.
Taiwan Semiconductor Manufacturing Co. was 2.4 per cent lower at Tw$100.5, while leading smartphone maker HTC rose 2.3 per cent to Tw$240.0.
- Manila fell 1.78 per cent, or 118.42 points, to 6,536.18.
Philippine Long Distance Telephone slipped 1.8 per cent to 2,790 pesos and SM Investments plunged 4.2 per cent to 1,033 pesos.
- Wellington fell 1.05 per cent, or 46.03 points, to 4,341.02.
Fletcher Building eased 3.83 per cent to NZ$8.80 and Contact Energy was down 1.25 per cent at NZ$5.52 but Telecom rose 2.24 per cent to NZ$2.28.