* Euro tumbles, hits one-year low against dollar
* Stocks slide as materials, financials hit
* But losses pared on sense Asia impact limited
* European shares set to extend selloff
By Elaine Lies
TOKYO, April 28 (Reuters) - The euro tumbled to a one-year low against the dollar and Asian stocks fell as cuts in Greece and Portugal's credit ratings set off a flight to safety on fears that the euro zone's debt problems are spreading.
Oil fell below $82 and metals prices were hit after ratings agency Standard & Poor's slashed the sovereign ratings of Greece to junk status and downgraded Portugal.
Still, most markets pared early losses on a sense the Asian fiscal and economic situation is stronger than that of Europe.
U.S. stock futures inched up after Wall Street fell on Tuesday, but leading European indexes were seen extending their slide. Financial spreadbetters saw Britain's FTSE 100 opening down as much as 0.3 percent.
"It's quite obvious that the fiscal fundamentals in Asia are much stronger than the peripheral Europe. I won't say there is no contagion... but there will not be lasting impact on Asia," said Desmond Soon, head of fixed income at DBS Asset Management in Singapore.
In issuing the downgrades, Standard & Poor's said it was concerned about Greece's ability to implement the reforms needed to address its high-debt burden and Portugal's ability to deal with its debt load given its weak economic outlook.
Investors said the credit woes could spread and drag on Europe's economy but the chances of global contagion were low given the economic strength elsewhere in the world.
Sentiment, though, took a hit. The IMF had warned in its World Economic Outlook report last week that the world risked a "debt explosion" if public finances weren't reined in.
"There will be some negative impact to most credit space including emerging market sovereign and quasi-sovereign bonds, but I don't think it will be long lasting," Soon said.
Market players in several countries said stock markets had been poised for a correction anyhow, after strong gains over the past few weeks. The MSCI ex-Japan index, for example, had risen 14 percent from a February low to Tuesday.
"What we have seen from the credit agencies last night is to a large extent playing catch up with what the market has already priced in," said Helmi Arman, bond strategist at PT Bank Danomon Indonesia.
The euro hit a one-year low against the dollar, falling as far as $1.3144 on trading platform EBS, after tumbling nearly 2 percent on Tuesday for its biggest one-day percentage loss in about a year.
After hitting the one-year low, it crawled higher on short-covering, to stand 0.3 percent higher on the day at $1.3190.. It rose 0.4 percent against the yen to 122.87 yen
Some traders said scheduled meetings in Berlin to discuss Greece had lent the euro some support. But a reprieve for the euro was seen as likely to be short-lived, particularly since it has fallen through a number of long-term support levels over the past few months.
The heads of the European Central Bank and the International Monetary Fund are due to brief German parliamentarians on Wednesday.
German Chancellor Angela Merkel is also due to hold talks with the heads of the IMF, the Organisation for Economic Co-operation and Development, the World TradeOrganisation and the International Labour Organisation in Berlin.
STOCKS SLIDE
Materials and financial shares were battered across the region, pushing the MSCI index of shares outside Japan down 1.4 percent.
Australian shares at one point tumbled 1.8 percent to a six-week low, with banks and miners hit hardest. The benchmark S&P.ASX 200 index ultimately lost 1.2 percent.
Japan's benchmark Nikkei fell 2.6 percent, paring losses that at one point took it down about 3 percent, with exporters suffering after gaining earlier this week. Honda Motor Co lost 1.5 percent.
Supported by safe-haven bids, the yield on the benchmark 10-year Japanese government bond fell to a four-month low and JGB futures climbed to a seven-week high.
Global-tracked Emerging Markets Bond Funds had their second-best week on record in the third week of April, following the previous week's record-setting inflow, data from EPFR global bond fund tracker shows.
Crude oil fell under $82 a barrel, pressured by data showing a surge in U.S. crude stocks. But NYMEX crude for June delivery later pared losses to stand at $82.23, down 21 cents.
The contract fell nearly $2 on Tuesday as the Greek and Portuguese ratings downgrades prompted market players to pull cash out of energy markets.
London copper and aluminium futures fell at the opening but later recovered slightly.
Gold edged down on Wednesday after surging to a 2010 high the previous day, with spot gold at $1,163.95 by 0227 GMT.
(Additional reporting by Jun Ebias and Saikat Chatterjee in SINGAPORE; Editing by Neil Fullick)