10/21/2011 02:52 EDT | Updated 12/20/2011 05:12 EST

Asian stocks fall as chronic European debt crisis lumbers on without clear sign of resolution

BANGKOK - Asian stock markets headed lower Friday as European leaders haggled over a strategy to deal conclusively with the continent's debt crisis.

Oil prices hovered above $86 per barrel and the dollar was lower against the euro and the yen.

Japan's Nikkei 225 index fell 0.2 per cent to 8,667.07. Hong Kong's Hang Seng was marginally lower at 17,978.77. Benchmarks in Taiwan, mainland China, Malaysia, Indonesia and the Philippines also fell.

South Korea's Kospi gained 1.3 per cent to 1,829.25 and benchmarks in India and Singapore rose.

Thailand's SET index rose 0.1 per cent to 910.40, clawing back some of Thursday's losses even as the country's capital Bangkok braced for the possibility that floodwaters will defeat a network of barriers and inundate the city.

Worries that Europe's troubles could get worse have kept markets on edge for weeks, and analysts said the volatility could continue for the near future.

"What you see now is one day of gains and one day of losses," said Tom Kaan of Louis Capital Markets in Hong Kong. "With what has been happening in the world, there is still no confidence and I think this will continue to the end of the year."

The Greek government is widely expected to go through some kind of default or restructuring of its debt, which could deliver a severe blow to an already weak European economy.

Signs of a modest economic uptick in the U.S. helped boost shares of Japanese exporters that count on American consumers for sales. Yamaha Motor Corp. rose 2.7 per cent and Panasonic Corp. was 1.6 per cent higher.

Heavy equipment shares also rose. Japan's Hitachi Construction Machinery Co. gained 1.2 per cent and South Korea's Hyundai Heavy Industries Co. added 2.2 per cent.

But shares of Japanese automotive giants Honda Motor Corp. and Toyoto Motor Corp. slipped after severe flooding forced a halt to their assembly lines in Thailand. Honda fell 0.4 per cent and Toyota, 0.2 per cent.

Samsung Electronics Co. rose 1.4 per cent after the company announced it had surpassed Apple Inc. in smartphone sales in the July-September quarter. Yonhap news agency cited Shin Jong-kyun, president of Samsung's mobile division, as estimating that the company had shipped more than 20 million smartphones in the third quarter.

Wall Street trading was choppy as talks in Europe appeared to falter because of differences between Germany and France over how to protect European banks from the consequences of a default.

A messy default by Greece could lead to deep losses for European banks that hold Greek debt. If that causes them to pull back on lending to each other, it could cause another freeze in global credit markets like the one in late 2008 after Lehman Brothers collapsed.

Wall Street rose slightly on news that a second summit meeting would take place next week after it became clear that France and Germany would not be able to bridge their difference in time for Sunday's meeting.

The Dow Jones industrial average ended up 0.3 per cent to close at 11,541.78. The Standard & Poor's 500 index rose 0.5 per cent to 1,215.39. The Nasdaq composite lost 0.2 per cent to 2,598.62.

But analysts cautioned investors to rein in expectations of a solution to Europe's debt crisis.

"Whether this Sunday's EU Summit can live up to investor expectations remains to be seen ... the precedent set by previous summits already bodes ill for detailing of any new policy initiatives," Credit Agricole CIB wrote in a research note.

Sunday's summit was supposed to deliver a comprehensive plan to finally get a grip on the currency union's debt troubles. But French President Nicolas Sarkozy and German Chancellor Angela Merkel said Thursday they needed more time after it became clear that the two countries disagreed on some key points of the plan.

Benchmark crude for December delivery was up 16 cents at $86.23 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 22 cents to settle at $86.07 in New York on Thursday.

In currencies, the euro rose to $1.3789 from $1.3777 late Thursday in New York. The dollar fell to 76.77 yen from 76.85 yen.