Tuesday, December 6, 2011

GLOBAL MARKETS-Asian shares, euro dip after S&P downgrade warning

SINGAPORE (Dec 6): Asian stocks and the euro dipped on Tuesday after ratings agency Standard & Poor's warned it might downgrade euro zone countries en masse, piling pressure on European leaders ahead of a summit later this week.

The unprecedented warning brought to a halt a rally in global equities that began last week and had continued on Monday, when the leaders of France and Germany agreed a plan aimed at guiding the region out of its two-year-old debt crisis.

"The plan is so wide-ranging that after the initial reaction, investors lost some enthusiasm as reality set in once again," said Phil Flynn, analyst at PFGBest Research in Chicago.

Oil prices also retreated after the S&P statement, which came late in the U.S. trading day, while Wall Street index futures fell and U.S. Treasury yields edged down, indicating investors were seeking safety in the dollar.

MSCI's broadest index of Asia Pacific shares outside Japan slipped 0.2 percent, with the heaviest losses in the growth-sensitive materials sector.

Tokyo's Nikkei share average fell 0.5 percent, while S&P 500 futures eased 0.2 percent.

S&P said it had told 15 of the 17 euro zone countries, including Germany, France and four others with the top AAA credit rating, that it might downgrade them within 90 days, depending on the outcome of Friday's summit.

The warning took the sheen off a Franco-German agreement on an over-arching plan for imposing budget discipline across the region in the search for a solution to the debt crisis.

The common currency eased around 0.1 percent to about $1.3390. It has steadily slipped from a peak around $1.3486 on Monday.

U.S. crude oil futures fell 0.4 percent to $100.60 a barrel, while gold held steady around $1,721 an ounce. - Reuters

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