Asian shares and the euro fell on Thursday as another delay in cementing a crucial bailout for stricken Greece underscored how far Europe is from resolving a debt crisis that threatens the stability of the financial system.
A three-hour teleconference between euro zone finance ministers failed to resolve all the issues surrounding a second aid package for Athens, putting off any decision on the matter until Monday at the earliest.
"It's not clear whether Athens will be able to secure funds needed to redeem bonds on March 20," said Sumino Kamei, senior analyst at Bank of Tokyo-Mitsubishi UFJ.
MSCI's broadest index of Asia Pacific shares outside Japan fell 1.3%, wiping out nearly all the gains made in the previous session, when riskier assets such as stocks and emerging Asian currencies rose broadly on hopes Athens would finally be granted the rescue funds.
Japan's Nikkei outperformed its Asian peers to record a six-month high, before losing steam to fall 0.2%.
The euro slid 0.4% to around $1.3015 as uncertainty over the bailout package put the single currency under renewed pressure.
Reflecting deep-rooted mistrust of Greece's commitment to deliver reforms in exchange for the rescue, several EU sources said on Wednesday that euro zone finance officials were examining ways of delaying part or even all of the second bailout programme while still avoiding a disorderly default.
Delays could possibly last until after the country holds an election expected in April, they said.
A debt swap agreement between Greece and private sector holders of Greek bonds, however, could go ahead, possibly allowing Greece to avoid missing a 14.5 billion euro bond redemption payment on March 20.
Greece said it has met all the conditions set by the European Union and the International Monetary Fund for a 130-billion-euro rescue fund needed to meet the vital debt repayment date in March.
As well as hitting stocks, the jitters over Europe put other riskier assets under pressure, with copper and oil both failing and the Australian dollar slipping a touch.
Asian credit markets weakened, another sign of faltering confidence, with the spreads on the iTraxx Asia ex-Japan investment grade index widening by about five basis points early on Thursday.
Tired, not Afraid
But while markets fell, the drop appeared to be limited.
"The weakness was neither intense nor broad-based enough to resemble a 'risk-off' event; markets seemed tired, but not afraid," Barclays Capital said in a note.
Data on Wednesday showed the euro zone economy shrank at the end of 2011 and a mild recession was likely as the debt-stricken south reels under the weight of the sovereign debt crisis, but bigger economies France and Germany may remain resilient.
On Wall Street, the CBOE Volatility index VIX or "fear gauge", while hovering near a 1-month high, appeared to be capped. The index measures expected volatility in the S&P 500 index over the next 30 days, and its rise is regarded as a sign of fading risk appetite.
Analysts say bad news now may lead to some corrections after markets have been on an uptrend since the start of the year, largely due to global liquidity injections from central banks aimed at containing the debt crisis and supporting growth.
MSCI's Asia ex-Japan stock index has risen nearly 14% this year, while the Nikkei has added 9.5% and the S&P 500 Index was up 7%. Gold has gained 10% and US crude has climbed nearly 11% this year.
US crude eased 0.2% to $101.60 a barrel on Thursday after gaining more than a dollar the day before. Brent crude edged down 0.3% to $118.57, coming off an eight-month high scaled on Wednesday on concerns over supply disruptions.
US data showed a solid underpinning for the economic recovery on Wednesday, with US manufacturing output rising in January, a gauge of factory activity in New York state hitting a 1-1/2-year high in February and optimism among home builders approaching a five-year high this month.
But US stocks eased about half a% after the Federal Reserve's minutes from its January meeting showed some officials were concerned over high unemployment.
