Asian Markets Fall

HONG KONG—Asian stocks ended down, with Japan's index falling for a third straight trading day, as a downgrade of Spanish banks intensified pressure on a European Union meeting later this week to help solve the ongoing debt crisis.

"It's quite depressing," said Morgan Stanley Smith Barney investment advisor Shannon Briggs in Sydney. "Everyone is down in the dumps and there's a distinct lack of confidence in anything."

Moody's Investors Services lowered its long-term ratings on 28 Spanish banks by between one and four notches, reflecting the agency's view that Madrid's ability to provide support to the local banking system has declined. The downgrades came on the same day that Spain formally requested EU aid to help finance its weakened banking system.

In the Markets

• Live: Markets Pulse
• Spain's IBEX Loses 1.4%
• India Shares Likely to Stay Volatile
• Moody's Cuts Ratings on 28 Spanish Banks
• Blue (Monday) Chips Retreat

"Expectations are very low for the upcoming European summit," said Tim Waterer, senior trader at CMC Markets in Sydney. "There is a feeling that nothing concrete is going to come out of it and that we will be none the wiser about the solution to long-term problems."

Japan's Nikkei Average lost 0.8% to 8663.99. The strengthening yen was a factor, making local products less attractive to foreign buyers, but investors were also riled after a parliamentary select committee approved a bill to double consumption tax by 2015.

Hong Kong's Hang Seng Index spent much of the morning trying to stay positive. After falling 3.2% over the previous three sessions, the benchmark managed to carve out a 0.5% gain to 18981.84. Telecoms companies helped pull the market up, with China Unicom and China Mobile up 0.8% and 0.9% respectively; while the weakest performer was gaming company Sands China, which sank 5.8%, due to fears over the growth of the Macau gaming industry.

South Korea's Kospi dropped 0.4% to 1817.81, despite a recovery in technology stocks that were heavily sold on Monday. Samsung Electronics, which fell 3.6% in the previous session, was up 0.6%; while memory chipmaker SK Hynix gained 0.2%.

Also in South Korea, Samsung Engineering climbed 0.6% on news that it received a 2.4 trillion won ($2.1 billion) order in Kazakhstan to build a coal-fired power plant for Balkhash Thermal Power Plant.

Australia's S&P ASX 200 retreated 0.4% to 4013.30, and the China Shanghai Composite ended flat at 2222.07.

The euro weakened against the dollar throughout Monday to $1.2504, but climbed back to $1.2511 on Tuesday.

The Australian dollar dipped below parity with the dollar, touching $0.9968 overnight, before rising back to $1.0026 on Tuesday.

Growing risk aversion pushed investors towards the yen, Asia's traditional safe haven currency. The dollar lost 0.9% against the Japanese currency overnight to ¥79.67, before weakening to 79.53. The euro also hit a one-week low against the yen on Monday, ¥99.16, before bouncing back to ¥99.50.

Shares in Japanese electronics company Ricoh dropped 1.7%, as investors reacted badly to the company's acquisition of unlisted German IT Service company ADA-Das SystemHaus GmbH for an undisclosed sum. Investors were unsure whether the deal would contribute to profits.

Also in Japan, shares in Nippon Electric Glass dropped 7.8% after the company released a first quarter operating profit forecast of ¥6 billion, compared to a previous forecast range of ¥2.5 billion and ¥7.5 billion.

Write to Daniel Inman at daniel.inman@wsj.com