(Reuters) - Asian shares and the euro fell Thursday, sharply reversing the previous day's rally as optimism was dashed by another delay in cementing a crucial bailout for stricken Greece, underscoring how far away Europe is from resolving its debt crisis.
After a three-hour teleconference between euro zone finance ministers, questions remain over the euro zone's bailout of Greece, putting off any decision over the matter until Monday at the earliest, a German government official said on Wednesday.
MSCI's broadest index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> fell 0.7 percent, after climbing 1.4 percent on Wednesday when riskier assets including emerging Asian currencies rose broadly on hopes Athens would finally be granted the rescue fund.
Japan's Nikkei <.N225> opened down 0.3 percent after rallying more than 2 percent to six-month highs and outperforming its Asian peers on Wednesday.
The news of a Greek delay may prompt profit-taking for overheated markets, but fundamentally speaking the talks are advancing towards a bailout, said Hiroichi Nishi, equity general manager at SMBC Nikko Securities.
Global markets are flooded with liquidity amid central banks' easing policies so even if shares fall today, there are plenty of buyers at the dip, he said.
The euro eased 0.1 percent to $1.3050, slipping from Wednesday's high of $1.3191.
Reflecting deep-rooted mistrust over Greece's commitment to deliver reforms in exchange for the rescue, several EU sources said on Wednesday that euro zone finance officials are examining ways of delaying parts or even all of the second bailout program for Athens while still avoiding a disorderly default.
Delays could possibly last until after the country holds elections expected in April, they said.
A debt swap agreement between Greece and private sector holders of Greek bonds, however, could go ahead, possibly allowing Greece to avoid missing a 14.5 billion euro bond redemption payment on March 20 and preventing default.
Greece said it has met all the conditions set by the European Union and the International Monetary Fund for a 130-billion-euro rescue fund needed to meet the vital debt repayment date in March.
Asian credit markets weakened, with the spreads on the iTraxx Asia ex-Japan investment grade index widening by about five basis points early on Thursday.
MORE RESILIENT THAN BEFORE
While the markets fell, the drop appeared to be limited.
The weakness was neither intense nor broad-based enough to resemble a 'risk-off' event; markets seemed tired, but not afraid, Barclays Capital said in a note.
The euro zone economy shrank at the end of 2011 and a mild recession was likely as the debt-stricken south reels under the weight of the sovereign debt crisis, but bigger economies France and Germany may remain resilient.
The CBOE Volatility index VIX <.VIX>, while hovering near a 1-month high, appeared to be capped. The index measures expected volatility in Wall Street's S&P 500 over the next 30 days, and its rise is regarded as a sign of fading risk appetite.
Analysts say bad news now may lead to some corrections after markets have been on an uptrend since the start of the year, largely due to global liquidity injections aimed at containing the euro zone debt crisis and supporting growth.
The pan-Asian stock index has risen 13 percent this year, while Nikkei has added 9.5 percent and the Standard & Poor's 500 Index <.SPX> was up nearly 7 percent. Gold has gained 10 percent and U.S. crude has climbed nearly 11 percent this year.
U.S. crude was up 0.1 percent at $101.86 on Thursday after gaining more than a dollar the day before. Brent crude settled at an eight-month high on Wednesday at $118.93 a barrel on concerns over supply disruptions.
U.S. data showed a solid underpinning for the economic recovery on Wednesday, with U.S. manufacturing output rising in January, a gauge of factory activity in New York state hitting a 1-1/2-year high in February and optimism among home builders approaching a five-year high this month.
But U.S. stocks were weighed after the Federal Reserve's minutes from its January meeting showed some officials were concerned over high unemployment.
(Additional reporting by Mari Saito in Tokyo)