(Reuters) -- Most Southeast Asian stock markets pulled lower on Tuesday as a warning by ratings agency Standard & Poor's of a possible mass downgrade of the Eurozone kept market investors wary ahead of the EU summit late this week.

The benchmark Nikkei dropped 1.4 percent to 8,575.16. But it remained comfortably above its 25-day moving average, now around 8,545.     

The broader Topix index shed 1.4 percent to end at its session low of 738.01. Nearly ten issues declined for each that advanced.

Volume was relatively thin, with 1.59 billion shares changing hands, compared to last week's average full-day volume of 1.65 billion shares.    

Stocks in Singapore, Indonesia and other major sharemarkets fell to around one-week lows in choppy trading sessions that involved thin volume.    

Mild selling pressure hit many recent gainers, including banking stocks, as investors grew jittery over the impact of a potential rating downgrade on the global financial system.    

Brokers said market players returned for a bargain at one point thanks to some positive expectations involving a meeting of European leaders this week.    

Singapore's Straits Times Index and Malaysia's benchmark stock index each edged down 0.6 percent.
Jakarta's Composite Index (JCI) fell 0.7 percent.    

Yasmin Soulisa, analyst at broker Bapindo Bumi Sekuritas in Jakarta, expects further market downside, saying that with a negative outlook for all of Europe, there's a big possibility we will see the JCI weakening toward year end.    

The Philippines was down 0.21 percent and Vietnam  was 0.25 percent off.    

Thai stocks ended up 0.14 percent, reversing early losses, as domestic institutions bought shares for retirement mutual funds (RMFs) and long-term equity funds (LTFs) that offertax breaks. Demand for the funds often strengthens near the end of a year.    

In Singapore, market turnover fell to 0.7 times a 30-day average, with selling interest seen in banks. DBS Group Holdings Ltd dropped 2.4 percent and United Overseas Bank Ltd  slipped 1.3 percent.    

Traders attributed the selling to the unprecedented warning from Standard & Poor's.    

I don't think the timing is really conducive. This kind of warning should have come two years ago. It should not be now, a Singapore-based trader said.    

Asia and global equities halted a rally that began last week and had continued on Monday, when the leaders of France and Germany agreed on a plan aimed at guiding Europe out of its debt crisis.    

MSCI's broadest index of Asia Pacific shares outside Japan  was off 1.5 percent at 1000 GMT.    

Among losers in the region, Indonesia's PT Bank Mandiri  eased 1.5 percent and Malaysia's CIMB Group Holdings
Berhad fell 1.7 percent.    

(Additional reporting by Lisa Twaronite, Andjarsari Paramaditha in Jakarta and Singapore bureau.)