* Euro tumbles, hits one-year low against dollar
* Stocks slide as materials, financials hit
* But losses pared on sense Asia impact limited
* European shares set to extend selloff
(Repeats to more subscribers)
By Elaine Lies
TOKYO, April 28 (Reuters) - The euro tumbled to a one-year
low against the dollar and Asian stocks fell as cuts in Greece
and Portugal's credit ratings set off a flight to safety on
fears that the euro zone's debt problems are spreading.
Oil fell below $82 and metals prices were hit after ratings
agency Standard & Poor's slashed the sovereign ratings of
Greece to junk status and downgraded Portugal. []
Still, most markets pared early losses on a sense the Asian
fiscal and economic situation is stronger than that of Europe.
U.S. stock futures <SPc1> inched up after Wall Street fell
on Tuesday, but leading European indexes were seen extending
their slide. Financial spreadbetters saw Britain's FTSE 100
<> opening down as much as 0.3 percent. []
"It's quite obvious that the fiscal fundamentals in Asia
are much stronger than the peripheral Europe. I won't say there
is no contagion... but there will not be lasting impact on
Asia," said Desmond Soon, head of fixed income at DBS Asset
Management in Singapore.
In issuing the downgrades, Standard & Poor's said it was
concerned about Greece's ability to implement the reforms
needed to address its high-debt burden and Portugal's ability
to deal with its debt load given its weak economic outlook.
[] []
Investors said the credit woes could spread and drag on
Europe's economy but the chances of global contagion were low
given the economic strength elsewhere in the world.
Sentiment, though, took a hit. The IMF had warned in its
World Economic Outlook report last week that the world risked a
"debt explosion" if public finances weren't reined in.
[]
"There will be some negative impact to most credit space
including emerging market sovereign and quasi-sovereign bonds,
but I don't think it will be long lasting," Soon said.
Market players in several countries said stock markets had
been poised for a correction anyhow, after strong gains over
the past few weeks. The MSCI ex-Japan index <.MIAPJ0000PUS>,
for example, had risen 14 percent from a February low to
Tuesday.
"What we have seen from the credit agencies last night is
to a large extent playing catch up with what the market has
already priced in," said Helmi Arman, bond strategist at PT
Bank Danomon Indonesia.
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Graphic on Asia CDS vs Greece http://r. reuters.com/nyw69j
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
The euro hit a one-year low against the dollar, falling as
far as $1.3144 on trading platform EBS, after tumbling nearly 2
percent on Tuesday for its biggest one-day percentage loss in
about a year.
After hitting the one-year low, it crawled higher on
short-covering, to stand 0.3 percent higher on the day at
$1.3190. <EUR=>. It rose 0.4 percent against the yen to 122.87
yen <EURJPY=R>
Some traders said scheduled meetings in Berlin to discuss
Greece had lent the euro some support. But a reprieve for the
euro was seen as likely to be short-lived, particularly since
it has fallen through a number of long-term support levels over
the past few months.
The heads of the European Central Bank and the
International Monetary Fund are due to brief German
parliamentarians on Wednesday.
German Chancellor Angela Merkel is also due to hold talks
with the heads of the IMF, the Organisation for Economic
Co-operation and Development, the World TradeOrganisation and
the International Labour Organisation in Berlin.
STOCKS SLIDE
Materials and financial shares were battered across the
region, pushing the MSCI index of shares outside Japan
<.MIAPJ0000PUS> down 1.4 percent.
Australian shares at one point tumbled 1.8 percent to a
six-week low, with banks and miners hit hardest. The benchmark
S&P.ASX 200 index <> ultimately lost 1.2 percent.
Japan's benchmark Nikkei <> fell 2.6 percent, paring
losses that at one point took it down about 3 percent, with
exporters suffering after gaining earlier this week. Honda
Motor Co <7267.T> lost 1.5 percent.
Supported by safe-haven bids, the yield on the benchmark
10-year Japanese government bond fell to a four-month low and
JGB futures climbed to a seven-week high. []
Global-tracked Emerging Markets Bond Funds had their
second-best week on record in the third week of April,
following the previous week's record-setting inflow, data from
EPFR global bond fund tracker shows.
Crude oil fell under $82 a barrel, pressured by data
showing a surge in U.S. crude stocks. But NYMEX crude for June
delivery <CLc1> later pared losses to stand at $82.23, down 21
cents.
The contract fell nearly $2 on Tuesday as the Greek and
Portuguese ratings downgrades prompted market players to pull
cash out of energy markets. []
London copper and aluminium futures fell at the opening but
later recovered slightly.
Gold edged down on Wednesday after surging to a 2010 high
the previous day, with spot gold <XAU=> at $1,163.95 by 0227
GMT.
(Additional reporting by Jun Ebias and Saikat Chatterjee in
SINGAPORE; Editing by Neil Fullick)
