Asian stock markets sink over US debt fears

HONG KONG (AP) — Asian stocks sank Thursday as U.S. lawmakers struggled for another day to come up with a compromise that would prevent a debt default in the world's biggest economy.
Oil fell below $97 a barrel. The dollar weakened against the yen and strengthened against the euro.
Investors were growing increasingly anxious as the U.S. government came another day closer to an Aug. 2 deadline to raise the country's $14.3 trillion borrowing limit.
If there is no legislation in place by then, officials say the Treasury will not be able to pay all the nation's bills and possible trigger a catastrophic default on its debts. Investors are worried such a default would send shockwaves through the global financial markets as the U.S. economy is still struggling to recover from the worst recession in decades.
Stock markets will likely grow more volatile as any possible solution comes down to the wire
The House of Representatives plans a vote Thursday on a Republican plan to cut spending and raise the borrowing limit. Senate leaders are watching what happens to that plan before moving ahead with their own.
"As the 2nd August deadline is looming and no progress has been made so far, the worries over the US credit rating downgrade and debt default has spread to the equity market as well," strategists at Credit Agricole CIB wrote in a research note. "For the day ahead, market mood will likely remain downbeat."
Japan's Nikkei 225 stock average sank 1.1 percent to 9,935.07 and South Korea's Kospi fell 0.9 percent to 2,154.85. Australia's S&P/ASX 200 dropped 1.1 percent to 4,487.10.
Hong Kong's Hang Seng Index slid 1.2 percent to 22,258.34 and mainland China's Shanghai Composite Index dropped 1.3 percent to 2,687.92.
Benchmarks in New Zealand, Singapore and Taiwan also fell.
Asian stocks took their lead from declines on Wednesday in U.S. markets, indicating growing anxiety among investors over the debt impasse.
The Dow Jones industrial average fell 1.6 percent to 12,302.55, its biggest one-day drop since early June. It has fallen for four days straight. The S&P 500 fell or 2 percent to 1,304.89. The technology-focused Nasdaq composite index fell or 2.6 percent, to 2,764.79, its worst day in five months.
In currencies, the dollar weakened to 77.77 yen from 78.06 late Wednesday in New York. The euro fell to $1.4344 from $1.4372.
Benchmark oil for September delivery was down 60 cents to $96.80 a barrel in electronic trading on the New York Mercantile Exchange. Crude lost $2.19 to settle at $97.40 on Wednesday.