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Growth-sensitive Asian shares were hit the most, while concerns that a delay in expanding the bailout fund could slow momentum in efforts to prevent the euro zone's debt woes from morphing into a banking crisis led to a widening in Asian credits.

"The broader trend is dictated by the problems in Europe, and Slovakia's rejection was negative to sentiment, as beefing up the fund is vital in providing a sense of security," said Hirokazu Yuihama, senior strategist at Daiwa Capital Markets.

S&P 500 futures eased after below-forecast results from Alcoa Inc. (AA.N) that could sour the mood on Wall Street later as attention turns to the U.S. earnings season.

Slovakia is the only euro zone country that has yet to approve a plan to boost the funds available to the bailout vehicle, and a re-vote was expected later this week.

While the main opposition party was set to support the measure now the government has resigned, the twist has added to market nervousness just as European authorities were striving to come up with concrete steps to avoid a wider contagion.

MSCI's broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS fell 0.6 percent, led by a near 2 percent drop in the materials sector .MIAPJMT00PUS.

Japan's Nikkei average .N225 was down 0.7 percent, after

Alcoa Inc, the largest U.S. aluminum producer, said on Tuesday slowing economic growth knocked prices for the metal lower, denting its third-quarter profit and sending its shares down in after-hours trading.

"Those who were looking for reassurance about the U.S. earnings season didn't find it," said Kenichi Hirano, operating officer at Tachibana Securities.

Asian credit markets reflected renewed bearish sentiment, with the iTraxx Asia ex-Japan investment grade index widening by about 15 points.

A Hong Kong based fund manager said recent market gains were largely a technical rebound from last month's sell-off, adding that a lack of inflows from pension and mutual funds, so-called real money, was stymieing new bond corporate issues.

"All that you are seeing now is short-covering and fast money. There is no fund inflows into Asia and at this point no issuer can come to the market. Will they (issuers) pay up? I doubt it," the fund manager said.

GROWTH WORRIES

Brent crude fell on Wednesday, snapping five days of gains, after OPEC cut its global oil demand forecast and as the Slovak hitch in the euro zone bailout fund plan rattled investors' confidence across asset classes.

Brent was down 0.3 percent at $110.37 a barrel while U.S. crude futures fell 0.8 percent to $85.09.

Industrial metals such as copper also fell on concerns over an economic slowdown and caution before Chinese economic data due later in the week including CPI, PPI and trade balance.

The euro eased, as a recent rally stalled after the Slovak vote, trading down around 0.3 percent on Wednesday at $1.3604.

Market sentiment had improved this week, after a weekend pledge by German and French leaders to come up with a plan to tackle the debt crisis.

Banking and regulatory sources said on Tuesday that Europe's banks would have to achieve a significantly stronger capital position under a quick-fire regulatory health check and may need to raise some 100 billion euros ($137 billion).

Jose Manuel Barroso, president of the European Union's executive European Commission, said he would propose a bank recapitalization plan on Wednesday, even though there is no agreement yet on where the money will come from.

Rating agencies Standard & Poor's and Fitch Ratings downgraded Spanish and Italian banks on Tuesday, underscoring concerns about the impact of the escalating debt crisis on the sector.

(Additional reporting by Lisa Twaronite in Tokyo and Umesh Desai in Hong Kong; Editing by Alex Richardson)

Stocks wavered between gains and losses throughout the session. Markets have been reacting to news from the euro zone where officials are trying to contain a debt crisis that threatens large European banks and global financial stability.

The focus now will shift to earnings season, which begins with Alcoa Inc's (AA.N) report after the close of trading. U.S. economic indicators have shown signs of slow growth and investors are waiting to see how this has affected company profits.

"Earnings are always important but even more so here after several quarters of solid earnings across many industry sectors. I think investors are going to want to see that continuing or solidifying itself. Otherwise you could see further selloffs," said Michael Cuggino, president and portfolio manager of Permanent Portfolio Funds in San Francisco.

Materials stocks fell throughout the third quarter on worries about global growth slowing. Alcoa gained 2 percent to $10.30 in regular trading but is down 35 percent since the beginning of the third quarter.

After the market closed, Alcoa said third-quarter profit jumped from a year ago, but earnings and revenue slipped from the second quarter as economic growth slowed from the first half of this year.

A delay in a key vote by Slovakia on expanding the euro zone rescue fund has also kept investors cautious.

With 16 of 17 euro zone states having ratified a pact to boost the size and powers of the European Financial Stability Facility bailout fund, all eyes turned to Slovakia. The country's finance minister said the country was expected to approve the changes this week.

Any more delays in coming up with a plan intended to head off crisis could give the market an excuse to sell. Stocks have reached the top of a recent range, hitting resistance around 1,195 on the S&P 500. Another area of resistance is seen at 1,215 on the S&P 500, said Larry Peruzzi, senior equity trader at Cabrera Capital Markets Inc in Boston.

"The bounce we've had is kind of getting us close to resistance levels ... we're looking to see if it can break through," he said.

Apple (AAPL.O), which gained 3 percent to $400.29, lifted the Nasdaq and S&P 500.

The Dow Jones industrial average .DJI was down 16.88 points, or 0.15 percent, at 11,416.30. The Standard & Poor's 500 Index .SPX was up 0.65 point, or 0.05 percent, at 1,195.54. The Nasdaq Composite Index .IXIC was up 16.98 points, or 0.66 percent, at 2,583.03.

After the close, Alcoa, the largest U.S. aluminum company, dipped slightly $10.03 after it posted results.

In the past week, analysts have lowered their consensus earnings estimates for Alcoa, citing a precipitous drop in metals prices in recent months sparked by global economic concerns.

About 6.90 billion shares were traded on the New York Stock Exchange, NYSE Amex and Nasdaq for the day, well below the year's daily average so far of 8.03 billion.

Advancing stocks outnumbered declining ones on the NYSE by a ratio of roughly 16 to 13, while on the Nasdaq, advancers beat decliners by about 3 to 2.

(Reporting by Caroline Valetkevitch; Editing by Kenneth Barry)

European Central Bank chief Jean-Claude Trichet said the debt crisis had become systemic and must be tackled decisively.

Slovakia is the only country in the 17-member currency zone that has yet to approve giving new powers to the European Financial Stability Fund. The expansion was agreed by euro zone leaders in July but must be ratified by each country.

The EFSF is Europe's main weapon to respond to a debt crisis that threatens the European common currency, the region's banks and potentially the global financial system.

The government of Slovak Prime Minister Iveta Radicova fell on Tuesday after a small party in her ruling coalition refused to back the plans. The outgoing government still expects to be able to enact the measure as a caretaker administration by the end of this week with support from an opposition party.

"There is an assumption that the EFSF, one way or the other, will be approved by the end of the week," Finance Minister Ivan Miklos told parliament ahead of the vote.

The failure in the Slovak parliament underlines the difficulty of forging a united response to the worsening debt crisis in a currency zone where all 17 member states must act in concert, and voters are increasingly angry at the growing costs.

Leaders are struggling to find a response that would protect euro zone banks if Greece defaults on its debts.

For now, Athens needs an immediate infusion of cash within weeks just to meet state payrolls. A loan programme has been held up while the European Union and IMF assess whether Greece is doing enough to get its finances in order.

After a weeks-long review of Greece's finances, inspectors from the European Union, IMF and European Central Bank, known as the troika, said an 8 billion euro loan tranche should be paid in early November. It still requires approval by euro zone finance ministers and the IMF.

MORE REFORMS NEEDED

The troika warned that Greece had made only patchy progress in meeting the terms of a bailout agreed in May last year.

"It is essential that the authorities put more emphasis on structural reforms in the public sector and the economy more broadly," the troika said in a statement.

It said additional measures were likely to be needed to meet debt targets in 2013 and 2014, and a privatization drive and structural reforms were falling short.

Germany, the euro zone's biggest economy, said a decision on whether to make the aid payment was still open.

A German Finance Ministry spokesman said the troika's verdict showed "both light and shadows":

"We'll wait and look at the report, analyze it and then decide what will happen with the sixth tranche."

That money would anyway only buy Greece and its euro zone partners a small amount of time.

Germany and France, the leading powers in the 17-nation euro zone, have promised to propose a comprehensive strategy to fight the debt crisis at an EU summit delayed until October 23.

After Athens admitted it would not meet its deficit target this year, there is a growing acceptance that a second Greek bailout agreed in July with private bondholders' participation may need to be renegotiated. A rush is now on to beef up the currency bloc's rescue fund and bolster its banks.

Europe's top financial watchdog warned that the euro zone's sovereign debt crisis threatened global economic stability.

Trichet issued the dramatic warning as chairman of the European Systemic Risk Board, created to avoid a repeat of the 2008 financial crisis, amid growing fears that Greece will default on its massive debt.

"The crisis is systemic and must be tackled decisively," Trichet told a European Parliament committee in his final appearance before retiring at the end of the month.

"The high interconnectedness in the EU financial system has led to a rapidly rising risk of significant contagion. It threatens financial stability in the EU as a whole and adversely impacts the real economy in Europe and beyond."

NEW BANK DATA SOUGHT

European banking regulators meanwhile asked banks across the continent to provide updated data on their capital position and sovereign debt exposures to help reassess their need for recapitalization.

European Commission President Jose Manuel Barroso said the EU executive would present proposals for bank recapitalization and other aspects of the crisis response on Wednesday.

Industry sources said the EU banking regulator had demanded lenders achieve a core capital ratio of at least 7 percent in a new round of internal stress tests, and banks that failed to reach that mark would be asked to bolster their capital.

That would mean some 48 banks would be required to raise a total of 99 billion euros in capital, according to a Reuters Breakingviews calculator using data from previous stress tests. Greek banks would need nearly a third of the total.

For a comprehensive deal to come together, the bloc's leaders must resolve differences over how to recapitalize banks, whether to force a Greek debt restructuring or stick to the existing voluntary deal with private bondholders, and how to use the euro zone's rescue fund.

Europe's inability to draw a line under the crisis has caused growing international alarm, with Japan weighing in on Tuesday after the United States and Britain pressed EU leaders to take decisive action.

Tokyo said it would consult with Washington before it considers buying more euro zone bonds. Finance Minister Jun Azumi urged Europe to restore market confidence in the run-up to a Group of 20 finance leaders' meeting in Paris this week.

Interbank lending rates in Europe continued to rise amid growing concern over European banks' ability to operate, despite the prospect of massive ECB liquidity support.

Some European banks voiced concern at the prospect of being forced by governments to raise additional capital that some say they do not need, possibly by taking public money. One senior banker said that could lead to legal challenges in Germany.

Germany's BDB banking association said Europe should look at recapitalization on a case-by-case basis rather than taking a blanket approach apparently envisaged by Berlin and Paris.

The director of the association, Michael Kemmer, also told ARD television that politicians should stick to a July agreement on private bondholder involvement in a rescue plan for Greece, which called for a 21 percent writedown.

German Finance Minister Wolfgang Schaeuble and the chairman of euro group finance ministers, Jean-Claude Juncker, have said that figure may no longer be sufficient and the talks may have to be reopened.

Speaking on Austrian television late on Monday, Juncker refused to rule out a mandatory debt restructuring for Greece, which many market analysts and economists say is bound to happen in the coming months. Many analysts see the rush to recapitalize European banks as a prelude to an enforced write-down of 50 percent or more on their Greek debt holdings.

(Additional reporting by Michael Winfrey and Martin Santa in Bratislava, Paul Carrel, Jonathan Gould, Philipp Halstrick, Edward Taylor and Sakari Suoninen in Frankfurt, and Huw Jones in London; Writing by Paul Taylor, Mike Peacock and Peter Graff)

However, the outgoing finance minister, Ivan Miklos, said the plan could still be approved by the end of the week.

Prime Minister Iveta Radicova had made the issue into a vote of confidence to try to prevent one of her coalition partners, the liberal Freedom and Solidarity (SaS) party, from opposing the EFSF, but in vain.

The count showed 55 votes in favor and nine against out of a chamber of 150 deputies. The remainder, including the SaS deputies, were absent or did not register a vote, and a majority of all seats was required for the motion to pass.

Radicova is expected to call another vote that is likely to pass comfortably with the support of the main opposition party, Smer, which had demanded a reshuffle or resignation as the price for its support.

"There is an assumption that the EFSF, one way or the other, will be approved by the end of the week," Miklos told parliament ahead of the vote.

Slovakia is the only euro zone member yet to ratify the deal.

The prospect of further delays to the ratification of expanded powers for the European Financial Stability Facility (EFSF) hit markets already under pressure from signs that the crisis is spilling beyond Greece's borders.

Even as Slovakia wrangles over the July agreement, euro zone leaders are scrambling to give the 440 billion euro ($600 billion) safety net even greater clout.

The leftist opposition Smer party has repeatedly said it supports the EFSF plan in principle and is ready to discuss backing it once the government is out of office.

"Smer is curious to see what the ruling coalition parties will propose in return for a fast-track vote and approval of this vital document for Slovakia," Smer's leader, former prime minister Robert Fico, told parliament.

"Smer is ready for this discussion."

A senior Smer official said he believed a new vote would be held "as soon as possible."

RAPID APPROVAL NOW?

Political analyst Grigorij Meseznikov said that, while talks on forming a new cabinet may take weeks, approval of the EFSF plan could come fast.

"I expect that quite quickly after the fall of this cabinet the rescue fund will be approved, within four days, because we are in a newly defined situation and Fico will position himself as the savior of the euro zone and Slovakia," he said.

The SaS had argued that, as one of the poorest members of the single currency club, Slovakia should not pay for debts racked up by richer countries.

"These are things that severely damage Slovakia. Slovakia is not responsible for saving the world," SaS leader Richard Sulik said ahead of the vote.

While Slovakia has been dragging its feet, euro zone leaders are discussing further action.

Germany and France, the leading powers in the bloc, have promised to propose a comprehensive strategy to fight the debt crisis at the EU summit, and there is a growing acceptance that a second Greek bailout agreed in July along with the EFSF expansion may not be sufficient.

A rush is now on to further beef up the rescue fund and shore up banks. European Central Bank President Jean Claude Trichet said on Tuesday the crisis had become systemic and could threaten global economic stability.

The EFSF agreement is intended to increase its coffers, allow it to buy bonds from the market to support countries under attack, bail out members who need funding and help them prop up failing banks.

Assuming Slovakia's parliament does eventually ratify the EFSF, lawmakers must adjust domestic legislation to implement the deal -- an issue analysts say should not pose a problem once Radicova secures the necessary support.

SLOVAKS FROWN AT BAILOUTS

Radicova said last week she was personally committed to ratifying the agreement by October 14 ahead of a meeting of euro zone leaders -- which has now been pushed back by a week to October 23.

Under the constitution, she will now have to resign but will stay in office until a new administration is in place. President Ivan Gasparovic must find a new prime minister. An early election is possible but is not a given.

Trepidation over the Slovak vote showed in markets on Tuesday. European shares fell after a four-day rally.

Sulik said he understood that markets welcomed governments pouring taxpayers' money into the private sector to prevent institutions failing, but that the approach had to be resisted.

"We simply must not be afraid of this," he said.

"When bourses fall and shares go down, let them. They will be cheaper and more people will buy them. This is called supply and demand."

A poll on Monday indicated that almost half of Slovaks support expanding the euro zone safety net, with 36 percent opposed, and many cringe at the idea that Slovakia could help trigger a new global economic downturn like the one that sent the export-dependent country into recession two years ago.

But with Slovak salaries averaging just 780 euros a month -- just a touch above Greece's 750 euro minimum wage -- many people in the country of 5.4 million also bridle at the thought of footing the bill for overspending in Athens, Dublin or Rome.

Last year, the Slovak ruling parties campaigned on pledges not to support the first bailout of Greece, and Slovakia duly stayed out of that package.

(Additional reporting by Petra Kovacova; Writing by Michael Winfrey and Jan Lopatka; Editing by Kevin Liffey)