SINGAPORE—Most Asian stock markets dropped Wednesday, as Greece's plan to hold a referendum on its newly crafted bailout package rattled investors, sending the Tokyo market to a three-week low and denting oil prices.
"Global market sentiment has performed a 180-degree turn in recent days," said Tim Waterer, senior foreign exchange dealer with CMC Markets in Sydney. "News of a proposed Greek referendum on whether or not to accept the bailout package has completely come from left field and has traders flabbergasted."
Several markets managed to recoup morning losses as traders awaited the outcome of the U.S. Federal Reserve's rate-setting meeting later in the global day. News that embattled Greek Premier George Papandreou's plan for a referendum on the country's latest bailout package had been unanimously passed by the Greek Cabinet earlier in the global day also helped prop markets. The referendum is likely to take place before Christmas, slightly earlier than previously expected.
Still, investors were keeping their distance from riskier assets amid the fresh euro-zone jitters.
"Markets are seriously pondering a disorderly default in Greece...Risk assets remain a sell on rallies against the background of prolonged European uncertainty," said Crédit Agricole strategist Mitul Kotecha.
Japan's Nikkei Stock Average was down 1.8% after earlier hitting a three-week low, while Australia's S&P/ASX 200, after briefly falling as much as 2% to a one-week low, was down 0.8%. South Korea's Kospi Composite and Hong Kong's Hang Seng Index were both down 0.9%, China's Shanghai Composite Index was off 1% and India's Sensex was flat.
Dow Jones Industrial Average futures were up 20 points in electronic trading.
Growth-sensitive stocks were down across the region, with heavy selling taking a toll on oil, resources and financial shares, as investors worried that the European debt crisis could tip the global economy into a double-dip recession. Most stocks were, however, up from their morning lows.
In Sydney, Rio Tinto was down 0.9% and Westpac Bank was off 0.8% while in Tokyo, Toyota Motor was 3.1% lower, Sumitomo Metal Mining 3.3% lower and Inpex 0.8% lower. In Shanghai, Jiangxi Copper was down 3.1% and Citic Securities was off 1.6%, and in Hong Kong, PetroChina was 1.7% lower, Bank of China 2.2% lower and Citic Resources 3.7% lower.
Earnings reports also continued to buffet trading in the region. Australia's OneSteel tumbled 14% after saying its first-half profit could be down 70% due to weak iron-ore prices and a strong Australian dollar.
The euro remained hostage to headlines out of Europe, but the Greek cabinet's approval of the referendum plan appeared to help the currency as well as the Australian dollar recoup earlier losses. Still, traders cautioned of risks to the downside.
"That everything would bounce on the Greek cabinet decision shows us just how much this is a lose-lose situation. Any near-term stability, especially with worrisome ramifications, shouldn't be a sign to buy," said Michael Turner, a strategist at RBC Capital Markets.
The single currency was fetching $1.3716 after earlier sliding to $1.3658, from $1.3700 late Tuesday in New York, and ¥107.17, from ¥107.40. The dollar was at ¥78.12, compared with ¥78.38.
Gold, a traditional safe haven, also briefly lost ground amid expectations investors may be forced to sell down the yellow metal to meet margin calls elsewhere. Spot gold was recently at $1,723.40 per troy ounce, up $3.50 from its New York settlement Tuesday.
December Nymex crude oil futures were down 76 cents at $91.43 per barrel on Globex.
Write to Shri Navaratnam at shri.navaratnam@dowjones.com
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