BANGKOK (AP) — The collapse of talks aimed at reducing the staggering U.S. budget deficit weighed on Asian stock markets Tuesday but failed to stifle a rebound in Europe.
Benchmark oil rose above $97 per barrel, while the dollar slipped against the euro and the yen.
European shares rebounded in early trading after sharp losses Monday. Britain's FTSE 100 added 1.1 percent to 5,280.31. Germany's DAX rose 1.2 percent to 5,671.74 and France's CAC-40 gained 1.4 percent to 2,936.53.
Wall Street was also headed for a higher opening, with Dow Jones industrial futures up 0.4 percent to 11,568. S&P 500 futures rose 0.6 percent to 1,197.80.
Shares in Asia struggled to make headway after Monday's losses on Wall Street. Japan's Nikkei 225 index fell 0.4 percent to 8,314.74, its lowest close since March 2009.
Australia's S&P/ASX 200 dropped 0.7 percent to 4,133. China's Shanghai Composite Index edged 0.1 percent lower to 2,412.63. Benchmarks in Taiwan, Malaysia and New Zealand also fell.
But Hong Kong's Hang Seng erased early losses, rising 0.1 percent to end at 18,251.59 and South Korea's Kospi index rose 0.3 percent to 1,826.28.
Investor jitters intensified Monday after a so-called supercommittee in Congress failed to reach a deal to cut the U.S. federal budget deficit by $1.2 trillion over 10 years. While not entirely unexpected, the failure led to heavy selling on Wall Street.
The deficit reduction impasse underscored doubts about Washington's political will to make tough decisions and drew a rare rebuke from Japanese Finance Minister Jun Azumi.
"The Democrat and Republican lawmakers need to stand in the shoes of the public. The key to market stability lies in how the parties could compromise towards an agreement," Azumi said at a news conference in Tokyo.
The impasse in Washington comes at a time of economic fragility in Europe, which is reeling from a spreading debt crisis and recession worries.
One European country after another has fallen into crisis because of debt. Wary of the ability of countries to pay back their loans, bond investors have insisted on higher returns on national bonds, pushing borrowing costs to dangerous levels.
Adding to the pessimism was a warning by Moody's ratings agency that AAA-rated France could face a downgrade because the debt crisis in Europe has pushed borrowing costs higher for the French government.
Clouds are also gathering in Asia, where Singapore — seen as a bellwether of Western demand because of its very high reliance on trade — said Monday its economy would likely suffer a sharp slowdown in 2012 as export orders from developed countries wane.
"I think we are looking at maybe 2 percent growth for the entire world. For a normal year, global economic growth will be like 4 percent, but now it has to revise down to about 2 percent, so you are taking out a big chunk of the GDP ... around the world," said Francis Lun, managing director of Lyncean Holdings in Hong Kong.
Losses among Asian stocks were broad-based and included banks and consumer shares.
Hong Kong-listed China Construction Bank and Australia & New Zealand Banking Group both fell 1.1 percent. Hong Kong-listed GOME Electrical Appliances slid 1.9 percent and China Garments Co. lost 2.3 percent.
Mainland Chinese shares in power, food and travel companies led the gains while shares in chemical, aviation and auto companies weakened. Air China Ltd. lost 5.5 percent while Bright Food (Group) Co. gained 3 percent.
On Monday, the Dow Jones industrial average lost almost 250 points to finish down 2.1 percent at 11,547.31. The Standard & Poor's 500 index dropped 1.9 percent to 1,192.98. The Nasdaq composite index declined 49.36, or 1.9 percent, to 2,523.14.
In currency trading, the euro rose to $1.3533 from $1.3496 late Monday in New York. The dollar slipped to 76.90 yen from 76.94 yen.
Benchmark crude for January delivery was down 28 cents at $96.64 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 75 cents to settle at $96.92 in New York on Monday.
AP researcher Fu Ting contributed from Shanghai.