Global markets dip as Moody's takes shine off Greek relief

The euro was down 0.2 percent at $1.3166 and the British pound shed as much as 0.6 percent to $1.5707, after ratings agency Moody's said it may cut the AAA ratings of France, Britain and Austria, while downgrading Italy, Portugal, Spain, Slovakia, Slovenia and Malta.

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"Asian markets actually followed the news about downgrades in those European countries, as markets realized there is no resolution yet and revived worries over the European problem," said Frances Cheung, senior strategist for Asia ex-Japan at Credit Agricole CIB in Hong Kong.

"The negative outlook to the UK, which was previously quite immune because it is not a member of the euro zone, also created a little bit of concern, because it seems it is affected."

The Moody's news weighed on already weak market sentiment as investors worried about Athens' ability to pursue harsh reforms in exchange for crucial aid. Relief over parliamentary passage of an austerity bill faded as intensifying violence across the country underscored the tough challenges ahead in Greece.

The bill's passage was only one of the three conditions for granting a new 130 billion-euro bailout, a lifeline for Greece to ride out a major bond redemption on March 20.

Europe gave Greece until Wednesday, when euro zone finance ministers are expected to meet, to specify how 325 million euros of the 3.3 billion euros demanded in budget savings will be achieved and to give a written commitment to implement the terms of the deal.

Provided there are no further setbacks at the EU meeting on Wednesday, terms of a bond swap deal with private bond holders to ease Greece's debt burden would then be announced.

"Market uncertainty remains high, since a number of steps remain to ensure that there is no disorderly default in the near term," Barclays Capital said in a note, adding that Greek parliamentary elections in April would make implementation risks of the austerity measures particularly challenging.

BOJ STRIKES

The BOJ surprised by expanding a scheme under which it buys government and private debt and lends cheap funds against various types of collateral, by 10 trillion yen ($130 billion) to 65 trillion yen, with the entire increase in long-term JGBs.