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Asian Markets End Lower on Credit Fears

A credit ratings downgrade for U.S. banking giant Citigroup sent Asian financial stocks lower Friday, while the yen sagged after Japanese business sentiment dropped to two-year lows.

Developments Thursday were a mixed bag for investors with solid U.S retail sales helping ease fears that the world's biggest economy was sliding into a recession.

Moody's Investors Service cut its ratings on Citigroup debt by one notch, the latest blow to the largest U.S. bank and a further setback for markets trying to recover from the subprime mortgage crisis. This follows warnings from Lehman Brothers about further write-downs due to the credit market crisis highlighted the ongoing threat to financial companies from the subprime mortgage meltdown.

Moody's action on Citi deepened the gloom on a sector already hit by disappointment over the Federal Reserve's modest 25 basis point rate cut this week and doubts about a global plan to tackle the credit problem. Australia's top investment bank, Macquarie Group, Japan's biggest bank Mitsubishi UFJ and South Korea's top lender Kookmin Bank all finished sharply lower.

Resource stocks were also under pressure amid concerns that slower global growth will crimp demand for their products. BHP Billiton and energy firm Inpex Holdings both declined.

A man uses his mobile phone in front of electronic stock boards at the Australian Securities Exchange (ASX Ltd.) headquarters in Sydney, Australia.
Ian Waldie | Bloomberg | Getty Images
A man uses his mobile phone in front of electronic stock boards at the Australian Securities Exchange (ASX Ltd.) headquarters in Sydney, Australia.

The Nikkei 225 Average closed a touch lower, dragged down by banks and property firms after the Bank of Japan's tankan survey showed corporate sentiment generally deteriorating. Index heavyweights such as industrial robot maker Fanuc and chip-tester maker Advantest gained as the same survey also showed companies are sticking to their robust capital spending plans, helping buffer losses on the tech-heavy Nikkei average.

South Korea's KOSPI shed 1.1 percent to a two-week closing low, after ratings agency Moody's cut its debt rating on Citigroup, deepening worries over subprime troubles and hitting financials.

Australian shares also closed at a two-week closing, down 1.6 percent, as investors dumped financial stocks after that Moody's Citigroup downgrade. An uncertain outlook for the U.S. economy due to the worsening subprime mortgage crisis also saw investors exit mining stocks, while property trusts were battered ahead of potential profit downgrade from Centro Property Group. Shopping mall owner Westfield Group and Goodman Group both finished sharply lower.

Hong Kong's Hang Seng Index lost 0.7 percent, extending losses in two straight sessions despite a firmer Wall Street, with selling on financial and property stocks leading to the slide as credit worries haunt the market.

Singapore's Straits Times Index fell 0.4 percent. Shares of KTL Global, which supplies steel ropes used for mooring vessels to the seabed, started trade 14 percent above their issue price.

Chinese stocks seesawed in and out of negative territory as financial counters and other blue chips came well off their lows. The Shanghai Composite Index ended 1 percent higher having staged a late-session rally.