Seoul stocks tumbled 2.2 percent Tuesday, stretching losses for a third day on worsening euro zone debt crisis and disappointing U.S. market performance overnight.

The benchmark KOSPI slipped 2.2 percent to close at 2,109.73. KOSDAQ lost 1.55 percent and closed at 490.63.

“This week, in large, is an adjustment period digesting the euro zone contagion fear as well as the weak unemployment data in the U.S. The policy rate review meeting is also taking place later this week so the fall today should be seen as a temporary reaction,” Kang Hyun-chill, an analyst at Woori Investment & Securities said.

Hynix Semiconductors, the world’s second largest computer memory chip maker, sank 4.16 percent to 25,350 won, leading the decline. Samsung Electronics fell 1.73 percent to 850,000 won and LG Life Science, a petrochemical research firm, slid 2.6 percent to 46,900.

Following a weak start in the morning, the KOSPI traded on losses between 2 to 3 percent as investors feared that more countries, including Italy and Spain, could be engulfed by the euro zone’s debt crisis following Greece.

The market also awaits the release of second-quarter earnings this month, with many anticipating grimmer performance at major exporters than earlier forecast on slowing demand from major economies.

“But the market understands why the plunge was heavy. Such sharp decline was also the case last year when the debt woes were spreading to Greece and Portugal, but stocks recovered quickly. It’s basically a known risk,” Jun Jib-won, an analyst at Kiowa Securities said.

Tech shares on KOSDAQ were pulled down by a report from the Korea Exchange disclosing the list of companies that inflated revenue forecast for the second quarter on unreasonable ground.

Kiryung Electronics, the satellite and broadcasting service firm, fell 14.95 percent to 455 won.

The bourse operator found a total of eight KOSDAQ-listed companies, including Kiryung, to have manipulated their prospective earnings.

Europe’s debt picture grew cloudier after finance ministers of Greece, Portugal and Ireland promised cheaper loans, longer maturities and a more flexible rescue fund for heavily indebted nations without specifying details.

The Korean won closed at 1,066.5 won against the U.S. dollar from 1,057.8 won the previous session, hurt by the investors’ move to jump into the relative safety of the dollar on prospects Europe’s debt debacle will worsen.

By Cynthia J. Kim (cynthiak@heraldcorp.com)