* Euro dips, sheds gains made on EU's rescue package
* Asian shares dip after biggest 1-day pct rise in a year
* Doubts remain on how some euro countries will cut
deficits
(Repeats to more subscribers)
By Masayuki Kitano
TOKYO, May 11 (Reuters) - A massive relief rally in
financial markets on news of a $1 trillion deal to resolve
Europe's debt crisis fizzled on Tuesday on nagging doubts about
how Greece and other debt-laden euro zone countries will reduce
their budget deficits.
Asian stocks fell 0.8 percent in morning trade and European
shares were expected to follow, with financial bookmakers
seeing bourses in London, Frankfurt and Paris opening as much
as 0.7 percent lower. U.S. stock futures <SCc1> fell 0.5
percent.
The euro, which had initially surged on the news of the
weekend package put together by EU finance ministers, central
bankers and the IMF, eased slightly on Tuesday and was well off
its Monday high as investors grew cautious.
The single currency dipped 0.5 percent to $1.2726 <EUR=> by
midday from late U.S. levels on Monday.
The European rescue package, together with a pledge from
the European Central Bank to buy government bonds, helped ease
worries that Greece's debt problems would engulf other weak
countries in Europe and spark another global credit crisis.
In response, markets soared worldwide. Stocks in fiscally
weak Greece, Spain and Portugal jumped by double digits and
their risk premiums on their debt tumbled against benchmark
German bunds. Wall Street racked up its biggest one-day gain in
more than a year.
While the new safety net may have eased fears of a Greek
debt default in the near term, longer-term concerns remained
over whether Greece and some other euro zone countries with
large fiscal deficits will be able to deliver on tough fiscal
austerity measures.
Moreover, the crisis has highlighted deep political
divisions and structural economic problems across the
16-country euro zone and broader European Union.
[]
Those worries capped the upside for Asian equities.
MSCI's index of Asia-Pacific shares outside Japan fell 0.8
percent <.MIAPJ0000PUS> after climbing 3.4 percent on Monday,
its biggest single-day percentage gain since May 2009.
Japan's Nikkei average <>, which gained 1.6 percent on
Monday, fell 0.9 percent on concerns about the longer-term euro
zone outlook.
Hong Kong's Hang Seng index <> fell 1.4 percent after
its biggest jump in five months on Monday, while South Korean
shares <>, slipped 0.9 percent, giving back half of the
previous session's gains.
Market players said profit-taking weighed on equities
following Monday's sharp rally.
"Tokyo markets already had a chance to respond to this news
yesterday and basically have now settled down," said Nagayuki
Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley
Securities.
"Besides, even though one of the worst scenarios -- a Greek
default -- has been avoided for now, in many ways solving the
bigger problems have simply been postponed and new issues could
emerge in places such as Portugal and Spain."
Investors in Asia also kept a close eye on economic reports
from China for any clues on whether authorities will ramp-up
policy tightening measures in coming weeks.
Data on Tuesday showed China's inflation edged up to an
18-month high in April and bank lending topped expectations,
but the full suite of monthly data showed an economy that was
in robust health and not overheating as some have feared.
[]
Mitsushige Akino, chief fund manager for Ichiyoshi
Investment Management, said the uptrend in Asian shares from
troughs hit in late 2008 following the Lehman Brothers collapse
still seemed intact despite the sharp fall seen last week.
"But since last week's shock and turmoil is still clearly
in people's minds, it will probably take a while for markets to
recover," he said.
EURO ON BACKFOOT AGAIN?
In currency markets, the euro was well off its Monday high
near $1.3100, and retreated back to where it stood late last
week before the European Union's emergency package was
unveiled.
The single currency had slumped to a 14-month trough of
$1.2510 last week as fears of a mounting euro zone debt crisis
intensified and some global credit markets showed signs of
strain.
"The emergency package is effective in avoiding a near-term
crisis. But so much uncertainty remains for the euro zone,"
said Tsutomu Soma, senior manager of the foreign securities
department at Okasan Securities.
Sterling fell 0.3 percent to $1.4813 <GBP=D4>, held back by
political uncertainty in Britain following an inconclusive
election that left no single party with a clear majority to
rule.
Prime Minister Gordon Brown said he would step down in an
effort to try to keep his Labour Party in power. Labour and its
major rival, the Conservatives, are trying to woo the smaller
Liberal Democrats to form a government. []
U.S. crude futures dipped 0.4 percent to $76.47 a barrel
<CLc1> and spot gold edged higher to $1,203.60 <XAU=> an ounce.
(Additional reporting by Elaine Lies, Rika Otsuka and Kaori
Kaneko; Editing by Kim Coghill)
