* Euro, stocks fall as Greece aid package fails to impress
* Greek bond yields ease but remain elevated
* China move on bank reserve rules adds to uncertainty
By Dominic Lau
LONDON, May 3 (Reuters) - The euro and European shares fell
on Monday on concerns that a 110 billion euro bailout of Greece
may still face political hurdles, and that austerity measures
Athens agreed to enforce in exchange may prove too tough to
sustain.
Greece's bond yields eased though they remained elevated,
while shares in its banks <.FTATBNK> added 1 percent, also
supported by a European Central Bank decision to suspend its
minimum credit rating threshold for the country's debt.
Concerns over further possible monetary policy tightening in
China after Beijing raised its banks' reserve requirements added
to short-term uncertainty.
The euro <EUR=> failed to hold initial gains made after
European countries agreed to the financial aid package at the
weekend.
"Most of the news was already priced in, and expectations
were fulfilled. However, it didn't resolve any structural
problems and I would suspect the euro would be 'sell on
rallies'," said Geoffrey Yu, currency strategist at UBS.
The single currency was at $1.3225, down 0.5 percent from
late U.S. trade on Friday. It fell as low as $1.3207 in Asian
trade after rising to around $1.3359 earlier.
Traders reported stop-loss selling below $1.3220. More stops
are lined up around $1.3200, they said. Further downside support
was seen around the 1-year low of around $1.3112 hit last week.
World stocks measured by MSCI All-Country World Index
<.MIWD00000PUS> dropped 0.4 percent after falling 2 percent last
week. The index is still up 2.2 percent for the year.
"The fate of Greece is in the hands of the people of Greece.
They have to agree as well," said Koen De Leus, economist at KBC
Securities, in Brussels.
"We have had a great rally for more than a year and it's
normal that there is going to be some pushback. Investors are
looking for excuses to take profits."
Europe's FTSEurofirst 300 <> lost 0.4 percent, with
Germany's DAX <> down 0.4 percent and Spain's IBEX 35
<> falling 1.4 percent. UK markets were closed for a
holiday.
Ten-year Greek government bond yields <GR10YT=TWEB> were
around 20 basis points (bps) lower at 9.3 percent and the
premium investors demand to hold them rather than German Bunds
fell to 620 bps from 662 bps at Friday's settlement.
Two-year yields <GR2YT=TWEB> fell to 12.3 percent from
around 14.5 percent.
Other peripheral yield spreads such as those of Portugal and
Spain also narrowed, although only modestly, and losses in core
German Bunds were contained as markets remained wary that other
expensive measures might be needed to shore up other euro zone
economies.
Yields on benchmark 10-year Bunds <EU10YT=RR> were up 2 bps
at 3.044 percent, while those on 10-year U.S. Treasuries
<US10YT=RR> were down 2 bps at 3.657 percent.
In the commodity markets, crude prices <CLc1> eased to hover
above $86 a barrel.
(Additional reporting by Tamawa Desai, Atul Prakash and
Kirsten Donovan in London; editing by John Stonestreet)
