(Reuters) - Asian shares fell Monday heightening worries that the mass sovereign debt rating cuts by Standard & Poor's would further aggravate euro zone funding difficulties and recapitalization, threatening to derail progress in resolving the debt crisis.

MSCI's broadest index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> slipped 0.3 percent, sliding from a one-month high reached Friday.

Japan's Nikkei average <.N225> opened down 1 percent.

Global and U.S. stocks ended lower Friday, but well off their lows. The S&P downgrades, which the agency had warned in December, were announced after the markets closed.

U.S. markets are closed Monday for the Martin Luther King holiday.

The euro stood at $1.2643, having touched a low of $1.2624 Friday, its lowest since late August 2010, according to trading platform EBS. Against the yen, it reached an 11-year low near 97.10 earlier Monday, before steadying at 97.24 yen.

Rating agency S&P cut nine of the euro zone's 17 countries, including top-notch France and Austria, and said it would decide shortly whether to downgrade the euro zone's bailout fund.

Adding to jitters, talks stalled over a Greek bailout, putting Athens under strong pressure to complete a deal with private bondholders to cut its debt to more sustainable levels or risk default in March when it has to redeem huge bonds.

Downgrades and Greece restructuring risks are likely to bring volatility, said analysts at Barclays Capital in a research note.

While the analysts didn't expect the downgrades to derail the progress in Europe as the action had been priced in, they called for caution against possible negative surprises in U.S. corporate earnings, oil supply risk, and China growth.

We do not expect the market to be decisively adding risk and hence we stick to our recommendation to be tactically constructive, structurally short risk ... staying short risk and squaring the position in times when the sentiment improves, they said.

Friday's rating cuts reduced the number of AAA rated countries guaranteeing the issuance of the European Financial Stability Facility (EFSF) to four, raising concerns about its lending ability, vital to containing the euro zone debt crisis.

A senior euro zone official said the bailout fund EFSF can retain its AAA rating with S&P through higher guarantees from the euro zone's remaining triple A countries or lower lending capacity.

Pressed by the rating action, European leaders promised on Saturday to speed up plans to strengthen spending rules and get a permanent bailout fund up and running as soon as possible.

On its part, the European Central Bank will do all it can to calm the situation after the S&P downgrades, ECB Governing Council member Ewald Nowotny said Sunday.

Banks adamantly refuse to lend to each other, with latest data showing commercial banks deposited a record high 490 billion euros at the ECB overnight facility, effectively absorbing the central bank's massive fund injection to the system aimed at encouraging lending.

France and Spain will tap the markets this week, providing a key test to investor confidence.

Italian bond yields bounced off session lows and German Bund futures hit record highs Friday as an Italian debt sale did not go as well as many in markets had expected.

Cautious sentiment returned to Asian credit markets, with spreads on the iTraxx Asia ex-Japan investment grade index widening a tad early Monday.

(Editing by Kavita Chandran)