* Euro dips after Portugal downgrade, before Greece T-bills
* Stocks slip as China says no plans to relax property rules
* Alcoa results bode well for earnings season, lend support
By Dominic Lau
LONDON, July 13 (Reuters) - The euro fell on Tuesday after a
two-notch downgrade of Portugal's sovereign debt rating and
ahead of Greece's return to capital markets for the first time
since late April.
World equities drifted lower after China said it had no
plans to relax tougher property measures anytime soon, though
stronger-than-expected quarterly profits at aluminium group
Alcoa <AA.N>, which kicked off the U.S. earnings season, offered
support.
Beijing said it would continue to rein in speculation in the
country's booming property sector, dampening talk that it was
relaxing credit controls.
The comments also weighed on the Australian dollar <AUD=D4>
and copper prices <MCU3>, both seen as proxies of Chinese
growth.
The euro fell 0.4 percent to $1.2531 after Moody's Investors
Service cut Portugal's credit rating to A1 from Aa2 with a
stable outlook, though the impact was limited as it was making
up ground with rival agency Standard & Poor's. S&P rates
Portugal at A-minus, two grades below where Moody's latest
rating on Lisbon. []
Investors were already cautious ahead of the sale of
Greece's 1.25 billion euros ($1.57 billion) of six-month
Treasury bills.
"While the timing is always a little confusing, I don't
think the material nature of the move is all that surprising,"
said Sean Maloney rate strategist at Nomura.
"It doesn't have the same impact as it would if the likes of
S&P were to downgrade, given the move only brings them in line
with the lowest rating anyway."
The sale could prove to be a litmus test for the euro in the
short term ahead of the results of the euro zone banks' stress
tests next week, traders said.
The dollar was down 0.2 percent at 88.41 yen <JPY=>. Against
a basket of major currencies, the greenback rose 0.3 percent
<.DXY>. []
Portugal's borrowing costs rose slightly, with the
Portuguese/German 10-year yield spread <PT10YT=TWEB>
<DE10YT=TWEB> widening to 290 basis points (bps), around 4 bps
wider versus Monday's settlement.
The cost of protecting Portuguese government debt against
default rose to 286 bps from 279.5 bps at the New York close on
Monday, according to monitor CMA DataVision.
Bund futures <FGBLc1> erased losses, rising to a session
high of 129.47, up 13 ticks on the day.
STOCKS EASE
World stocks measured by the MSCI All-Country World Index
<.MIWD00000PUS> ticked 0.1 percent lower. It gained more than 5
percent last week to post its best weekly rise in a year, though
it is still down 6.3 percent in 2010.
The index carried a one-year forward price-to-earnings of
11.13, falling to a level last seen in March 2009 and compared
with its 10-year average of 15.41, according to Thomson Reuters
DataStream.
In Asia, China's Shanghai composite index <> dropped
1.6 percent, and Japan's Nikkei average <> slipped 0.1
percent.
The FTSEurofirst 300 <> of leading European shares put
on 0.9 percent, while Portugal's PSI 20 index <> fell 0.1
percent.
"We've seen a deterioration in the data points coming
through from China ... so there are some concerns about a
slowing of the prolific growth we've been seeing in China, which
has been unnerving some investors," said Henk Potts, equity
strategist at Barclays Wealth.
Intel <INTC.O> is due to unveil its quarterly results later
in the day and JPMorgan Chase <JPM.N>, Citigroup <C.N>, Bank of
America <BAC.N> and General Electric <GE.N> will report later
this week.
(Additional reporting by Will James, Jon Hopkins, George
Matlock and Ian Chua; Editing by Hugh Lawson)
