* S&P may cut Greece debt rating within a month
* Moody's may still downgrade Greece if it deviates from
plan
* Euro hits one-year low against yen; US dollar rebounds
* Stocks sag on worries about global economic recovery
* European fiscal fears are the nemesis of recovery trade
By Kevin Plumberg and Vidya Ranganathan
SINGAPORE, Feb 25 (Reuters) - The euro tumbled to a
one-year low against the yen on Thursday and Asian stocks fell
on fears that a potential downgrade of Greece's debt rating
will worsen Europe's outlook and imperil the global economic
recovery.
Standard & Poor's said overnight that it may still cut its
rating on Greece by up to two notches within a month, citing
downside risks that could complicate Athens' efforts to cut its
massive deficit. []
Moody's also told Reuters that Greece is still at risk of a
downgrade if it deviates from its fiscal debt plan.
[] []
The warnings from the credit agencies weighed on the euro
and prompted investors to sell riskier assets such as equities
and move into safer bets such as the Japanese yen <JPY=>.
The euro dropped 1.2 percent against the yen to 120.48 yen
<EURJPY=R> and 0.5 percent against the U.S. dollar to $1.3464.
Major European stocks were expected to open as much as 0.5
percent lower, according to financial bookmakers, ahead of
consumer and business sentiment readings for the region later
in the day
U.S. stock futures fell 0.7 percent <SPc1>, after Wall
Street rallied on Wednesday on comfort that Federal Reserve
Chairman Ben Bernanke pledged to keep interest rates low for a
long time, even though he offered a relatively sombre
assessment of the U.S. economy.
Mixed economic data from the United States and Europe in
recent weeks have raised concern about whether the global
recovery is losing steam, with the U.S. hamstrung by high
unemployment and Greece testing EU unity and policymaking.
"We have to look at the facts and whether the government of
Greece is going to do what it has promised to do," Pierre
Cailleteau, global head of sovereign ratings at Moody's
Investors Service, said in an interview.
"A small deviation would lead to a small downgrade and a
large deviation, which we think is unlikely, would lead to a
large downgrade," he said, referring to Greece's fiscal
austerity measures.
Japan's Nikkei share average <> fell 1 percent after
an early rally fizzled, with the stronger yen hurting
exporters.
Shares of Toyota Motor Corp <7203.T> <TM.N> slipped 0.2
percent after its chief apologised to consumers over massive
vehicle recalls and pledged reforms to sceptical lawmakers at
U.S. Congressional hearings. Toyota's U.S.-listed shares jumped
3.9 percent. [] []
"The market welcomed a rebound in U.S. stocks after news
that the country will continue its low rate policy," said
Yutaka Miura, a senior technical analyst at Mizuho Securities.
"But we've seen a series of worse-than-expected economic
data from America lately and uncertainty about the outlook for
the U.S. economy is increasing."
The MSCI Asia ex-Japan index <.MIAPJ0000PUS> fell 1.4
percent, with defensive sectors such as utilities and
telecommunications outperforming the broader market.
WATCHING A GREEK TRAGEDY
"Bernanke's comment had little impact on today's trade,"
said a currency forwards dealer at a European bank in
Singapore. "Now the market is more anxious about the European
zone fiscal woes, so the dollar got lifted up in early trade."
A report on U.S. new home sales on Wednesday highlighted
how the recovery in the world's largest economy is not yet on
solid ground. Sales slumped more than 11 percent to a record
low, suggesting the sector at the epicentre of the financial
crisis had yet to fully heal. []
Bernanke's assessment of the economy was also grim, further
curbing speculation of quicker policy tightening that had been
spurred by last week's raising of the Fed discount rate.
He said a weak job market and tame inflation warrant low
interest rates for "an extended period", making clear policy
tightening is some time away and boosting the Dow Jones
Industrial average <> by 0.89 percent. []
Investors will be looking to U.S. durable goods orders and
jobs numbers later on Thursday for further clues on the health
of its recovery.
Gold <XAU=> slid 0.4 percent to $1,092.60 an ounce, far
from Wednesday's high of $1,107.95 and down 3 percent from
Monday's peak above $1,130.
Oil prices <CLc1> fell 0.4 percent at $79.70 a barrel, off
Wednesday's highs at $80.45, a level hit when stock markets
rallied on the back of Bernanke's remarks despite a bearish
report showing a build up in U.S. crude stockpiles.
The sudden change in investors' sentiment from risk loving
to risk fearing is evidence that convictions in the market are
low, especially with Europe's fiscal weak links still
unresolved.
The euro has lost over 10 percent since late November as
fiscal woes in Greece intensified in the past few months
leading to a huge sell-off by investors.
"The Greek situation remains fluid. So acrimonious
discussions between Athens and Brussels could easily result in
further near term euro slippage," Citi said in a note.
(Additional reporting by the TOKYO newsroom)
(Editing by Kim Coghill)
