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LONDON (AFP) – European stocks sank on Tuesday, after heavy Asian losses, as investors dumped risky assets on the back of fading enthusiasm over Ireland's bailout and a spike in tensions between North and South Korea.

Financial markets were also hit by an overnight raid by FBI agents on three hedge fund firms as part of a vast insider-trading probe, and Chinese efforts to cool its booming economy.

"Markets are trading 'risk off' this morning on a combination of factors," CMC Markets analyst Michael Hewson told AFP.

"Irish bailout fears and political uncertainty, the Korean situation and FBI raids on hedge funds ... have made a heady cocktail for investors to digest.

"This has caused significant risk aversion this morning with the US dollar and gold gaining as a result."

Asian stocks slumped on Tuesday, unnerved also by the eurozone debt crisis, firing on the Korean peninsula and expectations that China will take further steps to rein in inflation.

In late morning trading, Dublin's stock market dived 1.94 percent, with the main fallers being in Ireland's battered banking sector.

London fell 0.54 percent, Frankfurt weakened 0.09 percent and Paris dipped 0.70 percent.

The European single currency slid to 1.3592 dollars from 1.3622 in New York late on Monday, as the greenback was boosted by its safe-haven status in times of economic and geopolitical uncertainty.

European shares rallied early on Monday but finished in the red as optimism over Ireland's bailout gave way to fears it might not ease pressure on other weak eurozone states, six months after a rescue for Greece.

"Another bailout -- and investors fear this won't be the last," said Vincent Chaigneau, head of fixed income strategy at French bank Societe Generale.

"The market reaction to the bailout news was fairly positive ... but the mood did not last .. Overall, the reaction to the rescue package was not quite what policymakers had hoped for," he said.

"We had warned ... that there might have been too much optimism on that front. The rescue is seen as a salve but does little to fix the structural problems."

Markets also fell on the back of political tensions in Dublin, as Irish Prime Minister Brian Cowen's governing coalition appeared to fall apart.

The turmoil intensified on Tuesday after Cowen promised to call a general election in the New Year once parliament passes a budget at the centre of the international bailout.

Cowen revealed late Sunday that his administration had applied for aid from the European Union and the International Monetary Fund, adding that it would be less than 100 billion euros (137 billion dollars).

Ilya Spivak, currency strategist at trading site Daily FX, agreed that Tuesday's fierce sell-off in risky assets on Tuesday was rooted in eurozone worries and Korea fears.

"The sell-off is being chalked up to a mixture of renewed sovereign risk concerns on the eurozone periphery ... overlaid with geopolitical concerns after North Korea shelled an island near the disputed Western border with its Southern counterpart," Spivak said.

North Korea fired dozens of artillery shells onto a South Korean island on Tuesday, killing one person, setting homes ablaze and triggering an exchange of fire as the South's military went on top alert.

In Asia, Hong Kong shares tumbled 2.67 percent, Shanghai shed 1.94 percent and Sydney lost 1.17 percent. Tokyo was shut for a holiday.

Wall Street closed mixed on Monday as Ireland's bailout renewed fears that other European states may require similar aid and as a large US insider-trading probe accelerated.

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TOKYO – Asian stock markets retreated Wednesday, extending a global sell-off triggered by Europe's simmering debt crisis and expectations China will raise interest rates again to tame inflation.

Sentiment was cautious as an anxiously awaited meeting of European finance ministers ended without an agreement to bail out debt-stricken Ireland. But European Union officials said they have "intensified" preparations for potential support for the country's troubled banking sector. That gave the euro a boost against the dollar after it tumbled the day before.

Speculation that China will take more steps to rein in its red-hot economy after inflation hit a 25-month high in October also kept Asian markets in check.

Japan's Nikkei 225 stock average lost 0.5 percent to 9,746.09 and China's Shanghai Composite Index slid 1.3 percent to 2,856.15.

Hong Kong's Hang Seng index fell 0.6 percent to 23,544.79 and Australia's ASX/S&P 200 was off 1.4 percent at 4,633.60 while South Korea's Kospi rose less than 0.1 percent to 1,900.14.

Elsewhere, markets in Taiwan and New Zealand fell. Singapore and Malaysia were closed for holidays.

Resource companies took a big hit around the region as commodity prices fell overnight. Australian miner Rio Tinto Ltd. tumbled 3 percent in Sydney while rival BHP Billiton Ltd. fell 2 percent.

In New York Tuesday, the Dow Jones industrial average fell 178.47, or 1.6 percent, to 11,023.50, hit by jitters over European debt and Chinese inflation. The broader Standard & Poor's 500 index fell 19.41, or 1.6 percent, to 1,178.34, while the Nasdaq composite index fell 43.98, or 1.8 percent, to 2,469.84.

Concerns that Ireland will be unable to pay the cost of rescuing its banks — which ran into trouble when the country's real estate boom collapsed — has worsened Europe's government debt crisis.

Markets have pushed up borrowing costs for other vulnerable nations such as Portugal and Spain and threatened to destabilize the common euro currency.

There was speculation that Ireland's government might be forced to take a bailout like the one that saved Greece from defaulting on its bonds in May. A euro 750 billion backstop stands ready from other countries that use the euro.

In currencies, the dollar fell to 83.32 yen from 83.39 yen late Tuesday. The euro rose to $1.3507 from $1.3479.

Benchmark crude for December delivery was up 3 cents at $82.37 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.52, or 3 percent, to settle at $82.34 on Tuesday.

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BEIJING – A plunge in Chinese stocks dragged world markets lower Friday as investors fretted Beijing will take new steps to cool the world's No. 2 economy and global leaders meeting in South Korea papered over currency tensions.

The losses in Asia and Europe followed a down day on Wall Street where Cisco Inc., the world's largest maker of computer networking gear, rattled investors by cutting its sales forecast for a second quarter in a row.

Oil prices tumbled below $87 after big gains the previous two days and Wall Street was set to slide. Dow futures were off 110 points, or 1 percent, at 11,132. Broader S&P futures shed 13.90, or 1.2 percent, to 1,197.20.

Markets were on edge as leaders from the Group of 20 major advanced and developing nations struggled at a summit in Seoul to resolve a U.S.-China currency dispute that threatens to escalate into a global trade war.

Adding to negative sentiment was mounting speculation that Ireland — one of Europe's most financially troubled countries — would not be able to cut public spending and may have to resort to a bailout.

China's Shanghai Composite index dived 5.2 percent to 3,310.58 amid expectations of more government measures to tighten credit and slow economic growth after inflation hit a 25-month high in October. The Shenzhen Composite Index for China's smaller second exchange slumped 6.1 percent.

"There are some rumors there might be another interest rate hike this weekend," said Linus Yip, a strategist for First Shanghai Securities in Hong Kong. The Chinese sell-off dragged down prices elsewhere in Asia, Yip said.

In early European trading, France's CAC-40 fell 1.9 percent to 3,792.31 and Germany's DAX dropped 1.1 percent to 6,653.14. Britain's FTSE 100 declined 1.1 percent to 5,749.04.

Japan's benchmark Nikkei 225 stock index ended down 136.65 points, or 1.4 percent, to 9,724.81 and Australia's S&P/ASX 200 shed 0.8 percent to 4,692.70.

Hong Kong's Hang Seng fell 1.7 percent to 24,270.26 and South Korea's Kospi retreated 0.1 percent to 1,913.12. Markets in India, Singapore and Taiwan were also lower.

In Seoul, leaders of 20 major economies refused to endorse a U.S. push to get China to let its currency rise, keeping alive a dispute that has raised the specter of a global trade war.

The crux of the dispute is Washington's allegations that Beijing is artificially keeping its currency, the yuan, weak to gain a trade advantage. But the U.S. position has been undermined by its own recent policy of printing money to boost a sluggish economy, which is weakening the dollar.

In the U.S. on Thursday, the Dow Jones industrial average shed 73.94 points, or 0.7 percent, to close at 11,283.10 as the weak outlook from Cisco shook faith in the strength of the technology industry's recovery.

In currencies, the dollar fell to 82.05 yen from 82.32 yen late Thursday in New York. The euro fell to $1.3608 from $1.3648.

Benchmark crude for December delivery slid $1.59 to $86.22 a barrel in electronic trading on the New York Mercantile Exchange. The contract settled unchanged at $87.81 on Thursday.

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