GLOBAL MARKETS-Tumble after Portugal downgrade, China rate hike

* Wall St stocks lower with Europe on Portugal downgrade

* Commodities hit by China's third rate hike of 2011

* Euro skids as downgrade highlights eurozone debt crisis

* Risk aversion on ahead of ECB, U.S. payrolls (Recasts, updates with U.S. markets' open; changes dateline, previous LONDON)

By Barani Krishnan

NEW YORK, July 6 (Reuters) - Portugal's credit downgrade pressured stock markets on Wednesday, reigniting fresh fears about euro zone debt just as concerns over Greece ebbed, while China's latest rate hike weighed on commodities.

Shares on Wall Street opened lower, joining European equity and credit markets, as Moody's downgrade of Portugal cast new doubt on European efforts to rescue distressed euro zone states without debt restructuring. For more, see: [ID:nL6E7I60XH]

Portugal's government bond yields hit lifetime highs, hammering the euro.

China's central bank raised interest rates for the third time this year [ID:nB9E7EM01R], making clear that taming inflation is a top priority as its economy slows. Copper fell as much as 1 percent in London while crude oil slipped half a percent. [O/R] [MET/L]

Gold , a safe haven, rose 0.7 percent.

Analysts said risk aversion across financial markets highlighted the fragility of the global recovery.

"Maybe we want a quick fix, maybe we are looking for one, but there is no quick fix and if there is, I haven't heard it yet," said Frank Lesh, a futures analyst and broker at FuturePath Trading LLC in Chicago.

The two-year yield on Portuguese government debt surged more than 2 percentage points to a lifetime high of 15.77 percent, while the 10-year yield climbed more than 1 percentage point to 13.45 percent, also its highest ever.

An hour after the start of trading on Wall Street, U.S. stocks were down slightly. The Dow Jones industrial average <.DJI> was off 4.70 points, or 0.04 percent, at 12,565.17. The Standard & Poor's 500 Index <.SPX> was down 4.40 points, or 0.33 percent, at 1,333.48. The Nasdaq Composite Index <.IXIC> fell 8.26 points, or 0.29 percent, to 2,817.51.

The FTSEurofirst 300 index <.FTEU3> tracking European shares and the MSCI world equity index <.MIWD00000PUS>, which follows global equities, both slipped about 0.3 percent.

Investors were also shedding risky assets ahead of the European Central Bank's monetary policy announcement on Thursday.

The ECB is all but guaranteed to raise interest rates by 25 basis points to 1.5 percent -- an encouraging development for the euro -- although markets remain uncertain on the timing of further rate moves by the central bank.

The euro fell 0.7 percent on the day to a session low around $1.43021, extending losses from the previous day. Its losses versus the dollar boosted the greenback 0.4 percent against a currency basket.

The euro's losses come as fears over Greece and Portugal are prompting investors to hunt for safer havens such as the Swiss franc and yen .

"Greece is a basket case and we will probably have Portugal and Ireland drifting in the same boat," said Steve Barrow, head of G10 currency research at Standard Bank.

"But for the ECB raising rates, we would have the euro falling pretty sharply. It is likely to hold in the $1.40-$1.50 range for now."

Markets showed little reaction to U.S. data on the service sector reflecting a slight slowdown in growth in June, according to the Institute for Supply Management.

The benchmark 10-year U.S. Treasury note was up 11/32, its yield at 3.0766 percent. (Additional reporting by Naomi Tajitsu, Atul Prakesh and Anirban Nag in London and Chuck Mikolajczak in New York; Editing by Dan Grebler)