(BN) Stocks, Index Futures Drop as North, South Korea Exchange Fire; Euro Slips

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Asian Stocks, U.S. Futures, Yen Slump After Korea Shelling

Nov. 23 (Bloomberg) -- Asian stocks and U.S. index futures extended losses while the yen dropped after North and South Korea exchanged artillery fire. The euro fell on speculation an election in Ireland will hinder the nation's aid talks.

The MSCI Asia-Pacific excluding Japan Index declined 2 percent to 455.42 as of 2:45 p.m. in Hong Kong, set for its biggest loss since Nov. 12. Futures on the Standard & Poor's 500 Index sank 0.9 percent while those for the Euro Stoxx 50 Index lost 0.6 percent. The yen weakened 0.4 percent to 83.63 per dollar. Japan's markets are closed for a holiday.

North Korea fired "several" artillery shells into South Korea near the two nations' western border, prompting a return of fire, the South's Joint Chiefs of Staff said in a statement. The confrontation added to losses earlier today after Moody's Investors Service warned of a downgrade of Ireland as the nation called an election and amid concern that China may intensify efforts to contain inflation.

"A bubbling over of tensions in Korea is another layer of uncertainty for markets that they don't need to contend with," said Tim Schroeders, who helps manage about $1 billion at Pengana Capital Ltd. in Melbourne. "There's enough going on in terms of European debt problems and Chinese inflation without having to deal with erupting geopolitical tensions."

South Korea's Kospi index fell 0.8 percent as Hyundai Motor Co., which sells vehicles in Europe, dropped 3.1 percent. After the market close in Seoul, the nation's Joint Chiefs of Staff said in a statement that its military has been put on high alert and will "respond strongly" to further provocation.

South Korea's won closed 1 percent lower while the one- month non-deliverable contract tumbled 3.6 percent to 1,155.34 per dollar after the report on the shelling.

To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net Shani Raja in Sydney at sraja4@bloomberg.net .

To contact the editor responsible for this story: Will McSheehy at wmcsheehy@bloomberg.net

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Víctor Lei