* Markets fall on fears global recovery may be slowing
* Traders fret China, U.S. measures could brake growth
* Techs hammered, Taiwan shrs in worst 1-day fall in 6 mths
* Yen falls sharply after S&P cuts outlook on Japan
By Umesh Desai
HONG KONG, Jan 26 (Reuters) - Asian stocks slid on Tuesday, with Taiwan suffering its worst one-day fall in six months, as fears mounted that China could impose further measures to curb soaring loan growth, potentially dampening a global recovery.
Highlighting fears that global growth may be sputtering, data showed South Korea's fast recovering economy lost its momentum in the fourth quarter and faces more serious threats if Chinese demand slows. [ID:nTOE60O00L]
Key stock indexes in Shanghai <.SSEC> and Hong Kong <.HSI> both fell 2.4 percent, with the Hong Kong benchmark falling below its 200-day moving average, a key long term support level.
European stocks were set to follow Asia lower, with financial spreadbetters expecting Britain's FTSE 100 <.FTSE> to fall 37-44 points or as much as 0.7 percent, Germany's DAX <.GDAXI> to slip 20-34 points or as much as 0.6 percent and France's CAC <.FCHI> to drop 20-34 points or as much as 0.9 percent.
The yen
In Japan, the Nikkei average slumped 1.8 percent to a five-week closing low, as the yen's broad rise in recent weeks battered exporters' shares.
The S&P news came after the stock market had shut, but
10-year Japanese government bond futures <1JGBv1> slipped after
the move to 139.26 while its 5-year credit default swaps
Tech shares have enjoyed a massive rally since early last year and signs are growing that investors are now taking some profits, fearing consumer demand for flat screen TVs and other gadgets may weaken if the global recovery stumbles.
The MSCI index of Asia Pacific stocks outside Japan <.MIAPJ0000PUS> fell 2 percent, with the index which tracks technology shares down over 3 percent.
Tech-heavy markets such as Taiwan and South Korea were especially hard hit by the sectoral rout and fears of ebbing Chinese demand.
Taiwan's main index <.TWII> fell 3.5 percent to its lowest
close since Nov. 30, 2009, with UMC
Currencies which are more sensitive to global growth like
the Australian dollar
"The market is beginning to pricing in rate hikes in the region and potential withdrawal of liquidity and accomodation," said Binay Chandgothia, chief investment officer at fund manager Principal Global Investors in Hong Kong.
"China has started taking small baby steps and so investments which were based on the low rates theme is now leaving the market now," he said.
Chandgothia added that it was likely macro hedge funds which are focused on monetary policy outlooks were selling on expectations of tightening in the region.
China implemented a planned increase in required reserves for some banks on Tuesday, sources told Reuters.
The punitive increase in the amount of reserves some banks have to set aside, which was ordered last week, came as a newspaper report said China's efforts to curb bank lending were meeting with mixed success, fueling fears that policymakers may take more aggressive action soon to keep the economy from overheating. [ID:nTOE60P04Y]
No new banks have been slapped with fresh higher reserve requirement ratios, the sources said. However, unless loan growth moderates, analysts said further tightening and an eventual interest rate rise are inevitable after the long Chinese New Year holidays next month.
Moves by Chinese authorities in recent weeks to tighten liquidity and curb lending have rattled investors around the world on worries the global economy is not strong enough yet to wean it off massive government stimulus.
A planned spending freeze in the United States, where President Barack Obama is under pressure to rein in the deficit, added to worries about the global growth outlook.
"The budget freeze in the United States, along with the latest moves by China, will hurt the South Korean economy, if not cripple all the recent recovery momentum," said Park Sang-Hyun, chief economist at Hi Investment & Securities in Seeoul.
"The global economy still needs government spending to stay on the recovery path."
U.S. President Barack Obama, under pressure from deficit hawks, will seek a three-year freeze on domestic spending in his 2011 budget that would save $250 billion by 2020, administration officials said on Monday. [ID:nN25219341]
Financial markets are now focused on key economic indicators such as U.S. GDP due out later in the week.
"The overriding concern is still the tightening on China's part," said John Mar, regional co-head, Asia equity sales at Daiwa Capital.
"This morning's headlines about the loans of big banks exceeding 1.4 trillion is probably a signal to the market that the Chinese government will be still vigilant on tightening measures," said Mar.
Oil