Asian stocks slipped on Tuesday, snapping a five-day winning streak, as worries about Europe's debt problems returned after Greece was downgraded to junk status, a move which also stymied the euro's rally.
Although Moody's 4-notch downgrade of Greece's credit rating to Ba1 was expected, as it was catching up with rival Standard & Poor's BB-plus rating, the move gave investors an excuse to book profits after shares hit a month high on Monday.
The euro, which has posted impressive gains in the last few sessions, saw its rally losing steam with the single currency failing to breach key resistance levels on charts.
Wall Street surrendered gains after the downgrade, ending little changed in low volume on lingering worries that the euro zone's fiscal problems may hamper a global economic recovery.
Global stocks had rallied earlier on data showing euro-zone industrial output surged in April, achieving the biggest year-on-year percentage gain in almost two decades.
I believe we are yet to feel the full impact of Europe's debt crisis, said David Taylor, a market analyst at CMC Markets in Australia.
In Asia, Tokyo's Nikkei share average slipped 0.2 percent <.N225>, reversing a three-day rising streak. The benchmark is now hovering around its 25-day moving average, a key psychological resistance level.
The MSCI index of Asia Pacific ex-Japan stocks <.MIAPJ0000PUS> fell 0.3 percent, led by losses in the resources <.MIAPJMT00PUS> and energy <.MIAPJHC00PUS> sectors.
The euro eased to $1.2211 from $1.2226 seen late in New York on Monday. It had gained 0.9 percent on Monday when it rose to as high as $1.2298 and well above a four-year low of $1.1876 hit last week.
Much of the gains of late have been fueled by traders covering their short bets against the currency, but dealers said the single currency was still vulnerable to any bearish news from the euro zone.
The negative market impact was tempered by the fact that the move by Moody's was partly a catch up to S&P's junk status for Greece whilst Moody's also noted that a debt restructuring could be avoided, said Credit Agricole CIB in a client note.
The Australian dollar, which has benefited from a gradual return of investors to riskier assets in recent sessions, was hurt by expectations that the central bank would keep interest rates unchanged at 4.50 percent in July.
Minutes for the Reserve Bank of Australia's (RBA) June policy meeting showed members had thought previous rate rises gave it time to see if Europe's troubles would hurt world growth, and to wait for more information on domestic inflation.
The Aussie fell as far $0.8548 as the RBA minutes gave currency speculators another reason to cash in recent gains.
Crude oil futures inched higher above $75 a barrel on hopes that surging fuel demand in emerging economies would offset any declines in Europe. U.S. crude prices on Monday pared news after the Greece downgrade but still held on to a 1.8 percent gain by the close.
(Additional reporting by Jungyoun Park in SEOUL; Editing by Kim Coghill)