Global stocks fell to a 15-month low Tuesday, pinning Asian stocks near a 16-month low, as investors shed riskier assets on growing doubts over Greece's ability to avoid default, fuelling fears of global financial turmoil and recession.

Fears over the banking sector's exposure to euro zone sovereign debt and plummeting value of assets across the board further led to a sharp widening of credit default swaps.

Weakening outlook for industrial demand weighed on copper and oil while flight-to-safety strengthened gold, yen and the dollar.

Investors are cutting their exposure to risk as the most extreme risks -- such as Greek default -- are looming closer than they expected, said Jung Sang-jin, a senior fund manager at Dongbu Asset Management.

MSCI's broadest index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> fell 1.58 percent, hovering near a 16-month low hit in late September. It fell about 3.6 percent on Monday.

The MSCI All-Country World index <.MIWD00000PUS> fell 0.52 percent to its lowest level since July 2010, adding to declines on Monday when bank shares were battered, with Franco-Belgian financial group Dexia calling an emergency board meeting after concerns about its exposure to Greece.

Japan's Nikkei <.N225> fell to a six-month low as a selloff in commodities pushed trading houses lower and the Greek woes pressured the financial sector.

We could be in for a shakeout even larger than the Lehman shock, said Hideki Amikura, forex manager at Nomura Trust Bank.

The massive selling pressures prompted some authorities to step in to help restore some order.

The Korea Exchange temporarily suspended program sales on the main Korea Composite Stock Price Index <.KS11> in early trading Tuesday due to drastic falls in futures as the broader market tumbled more than 5 percent.

Taiwan state funds were seen stepping in local market to prop up heavyweights such as Taiwan Semiconductor Manufacturing Co <2330.TW>, the world's top contract chipmaker, helping the market erase earlier losses to trade flat.

CDS WIDENS

The iTraxx Asia ex-Japan investment grade index widened by 13 basis points on Tuesday, after expanding 15 bps on Monday.

Banks are faced with concerns over their exposure to Europe's debt, but on top of that, the latest market tumble also brings to light that it is also weakening banks' financial strength as they themselves are investors, said Akane Enatsu, credit analyst at Barclays Capital in Japan.

Banks are in a bind and they can't get out of the situation, she said.

The market's overwhelming focus on Greece's financial woes overshadowed a better-than-expected reading from the U.S. Institute of Supply Management's September manufacturing index and a rise in construction spending, potential evidence that the U.S. economy can avoid a recession.

With a bleak global demand outlook, oil fell more than $1 on Tuesday, pressured by the debt concerns and a stronger dollar. U.S. crude fell to an intraday low of $75.92 a barrel, while Brent crude fell to as low as $100.50.

The yen, often regarded as safe haven, hovered near a 10-year peak against the euro and held firm against the dollar.

Investor preference for safer assets accelerated flows into gold, pushing the market up 1 percent while copper tumbled 4 percent as investors dumped the industrial metal on worries over a slowdown in growth and turned to dollar holdings.

European policymakers met on Monday to discuss ways to leverage the euro zone's rescue fund and pressure Greece to implement agreed structural reforms.

(Additional reporting by Jungyoun Park, Faith Hung and Hideyuki Sano; Editing by Alex Richardson)