HONG KONG: Asian markets resumed their downward trend on Friday as the eurozone debt crisis was stoked by a ratings downgrade for Greece and 16 Spanish banks, while weak US data added to the pessimism.

The losses followed a sell-off in Europe and on Wall Street as dealers become more risk-averse, which added to pressure on the euro.

Tokyo tumbled 2.34 per cent by the break, Hong Kong fell 2.13 per cent, Sydney shed 1.99 per cent, Seoul dived 2.54 per cent and Shanghai was 0.96 per cent off.

Moody's slashed the ratings of 16 banks in Spain by between one and three notches, citing “renewed recession (in Spain), the ongoing real-estate crisis and persistent high levels of unemployment”.

It also blamed the reduced creditworthiness of the government.

Top bank Santander and number two BBVA were both hit with three-notch downgrades to A3, while two other large banks Banesto and CaixaBank, were also cut to the same level.

The move came just over a week after the government intervened to prop up the fourth largest bank Bankia by taking a 45 per cent stake.

Bankia on Thursday had to bat away rumours it had been hit with a run on deposits, as nervousness around the eurozone grew over the entire Spanish banking sector.

Also Thursday Fitch downgraded Greece's credit a notch, to CCC from B-, saying it was vulnerable to default amid political uncertainty over Athens'

commitment to a crucial bailout plan and its possible exit from the eurozone.

“The downgrade of Greece's sovereign ratings reflects the heightened risk that Greece may not be able to sustain its membership of Economic and Monetary Union (EMU),” it said in a statement.

A strong showing by anti-austerity parties in May 6 elections and the failure of officials afterwards to form a government “underscores the lack of public and political support for the EU-IMF 173-billion-euro ($220 billion) programme”, it said.

A caretaker government of technocrats took office in Athens Thursday to prepare fresh elections to be held mid June amid rising popularity of political parties that oppose the bailout and its tough austerity measures.

The agency warned that if a new government did not support the bailout, Greece would likely leave the euro bloc and default on its debt, potentially hurting the ratings of other eurozone member countries.

The single currency bought $1.2706 in early Tokyo trade, compared with $1.2693 in New York, but down from $1.2744 in Tokyo Thursday.

The dollar stood at 79.35 yen compared with 79.28 yen in New York. The US currency bought 80.32 yen Thursday morning in Tokyo.

The euro stood at 100.76 yen, slightly up from 100.65 yen, the weakest level since early February reached in New York, and sharply lower than 102.35 yen seen in Thursday morning in Tokyo.

On Wall Street trade were subdued amid fears that a deep crisis in the eurozone may spread across the Atlantic and knock the tentative US recovery off course.

The Dow fell 1.24 per cent, the S&P 500 dropped 1.51 per cent and the Nasdaq plummeted 2.10 per cent.

Discouraging US indicators on regional manufacturing and the economic outlook added to investor woes.

Oil was lower. New York's main contract, West Texas Intermediate crude for delivery in June was down eight cents to $92.48 per barrel while Brent North Sea crude for July shed 53 cents to $106.96 in morning trade.

Gold was at $1,575.60 an ounce at 0339 GMT, compared with $1,547.20 late Thursday.