* 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
* For more on Greek debt crisis, click on []
By Dominic Lau
LONDON, May 3 (Reuters) - The euro and European shares fell
on Monday on concerns that a massive 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 but remained elevated after
European countries agreed to a 110-billion euro ($146.5 billion)
aid package to Greece at the weekend.
Athens has promised in exchange to carry spending cuts and
tax hikes worth 30 billion euros over three years, on top of
belt-tightening measures already taken.
The rescue package, the biggest ever for a single country,
eased fears of a near-term sovereign debt default, but it has
yet to obtain parliamentary approvals and it leaves open the
question of whether other fiscally vulnerable countries in
Europe might need aid.
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 the
aid package was agreed.
"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 $1.3232, 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.
World stocks measured by MSCI All-Country World Index
<.MIWD00000PUS> dropped 0.3 percent after falling 2 percent last
week, though the index is still up 2.3 percent for the year.
"The catastrophe of default that everybody is worried about
is behind us, but the market realises that it will be a very
long, difficult road to travel before it can get better," said
Philippe Gijsels, head of research at BNP Paribas Fortis Global
Markets in Brussels.
Gijsels said the market was concerned whether Athens can
carry out the tough steps agreed with its European partners, and
that other euro zone peripheral countries could come under
pressure.
Greek bank shares <.FTATBNK> lost 1.1 percent in choppy
trade, shedding initial gains registered after the European
Central Bank said it would accept all Greek government bonds as
security for loans, even if their credit rating continued to
fall.
Europe's FTSEurofirst 300 <> lost 0.3 percent, with
Germany's DAX <> down 0.1 percent and Spain's IBEX 35
<> falling 0.8 percent. UK and Japanese markets were closed
for a holiday.
Strong quarterly company earnings have helped support the
equities market in recent weeks. According to Thomson Reuters
Proprietary Research, nearly three quarters of European firms
that have reported first quarter results beat market estimates.
U.S. stock index futures <SPc1> <DJc1> <NDc1> were up 0.2 to
0.3 percent, indicating a firmer start for Wall Street.
U.S. shares tumbled on Friday to close out their worst week
since January as news of a criminal probe into Goldman Sachs
<GS.N> unnerved investors already anxious about prospects for
heavy regulation of the financial industry from Washington.
GREEK YIELDS STILL HIGH
Ten-year Greek government bond yields <GR10YT=TWEB> were
around 40 basis points (bps) lower at 9.1 percent and the
premium investors demand to hold them rather than German Bunds
fell to 620 bps from 662 bps at Friday's settlement.
"Implementation risks surrounding the plan remain," said
Nomura rate strategist Charles Diebel.
"We do not expect a sharp compression of Greek yields
towards European averages at present, especially as contagion
risks remain. This is a long-term problem and the outcome will
only be known in the fullness of time."
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.
Portugal on Monday successfully bought back 1 billion euros
of bonds expiring this month, offering reassurance to investors
concerned the country might struggle to redeem its debt.
[ID:nLDE6420W9}
Yields on benchmark 10-year Bunds <EU10YT=RR> were up 3 bps
at 3.052 percent, while those on 10-year U.S. Treasuries
<US10YT=RR> were down 3 bps at 3.6858 percent.
(Additional reporting by Tamawa Desai, Atul Prakash and
Kirsten Donovan in London; editing by John Stonestreet)
