LONDON (Reuters) - Lackluster corporate earnings and a credit rating downgrade of five Spanish regional governments weakened world shares and the euro on Tuesday, while expectations of stimulus in Japan hurt the yen.
The euro zone's debt crisis and the damage it is doing to worldwide economic health remains a top concern for investors still looking for firm proof that recent support measures from leading central banks are being felt.
Data on Tuesday showed business morale in France's manufacturing sector slumped to its lowest level in over two years, while a downgrade of five Spanish regions by Moody's added to nerves over the country now at the heart of the crisis.
The euro was down 0.22 percent at $1.3033 by 0945 GMT. Safe-haven German government bond prices moved higher and nudged up Spanish and Italian 10-year bond yields.
Financial markets are still waiting for a bailout request from Spain to trigger the European Central Bank's new bond-buying program, which many believe would draw a line under any threat of default from the euro zone's fourth-largest economy.
"Recent comments indicated that Prime Minister Rajoy has no real urgency to request a bailout and that has taken some steam off the rally and the downgrade of the regions is adding to the negative newsflow," Commerzbank strategist Michael Leister said.
"The market is realising that the momentum we had with a lot of events last week will most likely not be followed up by a quick aid request by Spain and that's prompting some profit- taking. We don't expect a sharp correction but a bit of a pullback," he added.
European shares .FTEU3, which ended Monday down 0.4 percent and are down 1.9 percent since the start of the week, buckled after an early push to stand 0.6 percent lower by mid-morning. Following falls in Asia, the MSCI index of world shares .MIWD00000PUS was down 0.3 percent.
Disappointing recent company results from the United States have cast a shadow over share markets. Heavy-equipment maker Caterpillar Inc (CAT.N) slashed its earnings forecast on Monday, adding to the recent warnings of weakness from bellwethers such as General Electric and Microsoft.
According to Thomson Reuters StarMine data, of the 9 percent of the European companies that have reported third-quarter results so far, just under half have fallen short of analyst forecasts.
London's FTSE 100 .FTSE, Paris's CAC-40 .FCHI and Frankfurt's DAX .GDAXI were all lower at 0945 GMT .L .EU .N, while U.S. stock futures pointed to a soft Wall Street open too.
Elsewhere in the currency market, the yen hit a three-month low against the dollar and a five-month trough versus the euro on belief that the Bank of Japan will further loosen policy later this month.
"Generally speaking, expectations for a BOJ easing help push the dollar up against the yen, but the effect on the economy from easing is limited. It's more to do with recent market flows which have been pointing to a weaker yen," said Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo.
Several central banks hold policy meeting this week, including the U.S. Federal Reserve, the Bank of Canada and the Reserve Bank of New Zealand. All of them are expected to keep rates on hold but may offer dovish statements, Barclays Capital said in a research note.
The U.S. central bank's policy-setting Federal Open Market Committee starts its meeting on Tuesday and is scheduled to release a statement at around 1815 GMT on Wednesday.
It comes after the final televised debate between U.S. President Barack Obama and his challenger Mitt Romney left the two neck and neck with two weeks to go until election day.
Copper, a metal closely attuned to the health of the global economy, fell to a fresh six-week low of $7,914 per tonne. Gold hovered at $1,716 an ounce, after falling to a six-week low around $1,713 on Monday.
Oil prices slipped for a sixth day on worries over oil demand growth due to an uncertain global outlook, but stayed above $109 a barrel with simmering tensions in the Middle East helping stem the slide.
"As always there are two main issues, one the global economy and the other is the progress --or lack of it-- in the euro zone crisis," said ABN Amro economist Nick Kounis.
"There remains quite some uncertainty on both fronts. Markets still remain to be convinced of a clear turning point in the global economy."
Additional reporting by Emelia Sithole-Matarise; Editing by Anna Willard and Giles Elgood