Asian stocks slid on Tuesday, falling further from a three-year high hit last week as investors took profits on risks of a Greek debt restructuring in Europe and the long-term threat of a U.S. government debt downgrade.

The euro nursed heavy losses early in Asia while the yen gained across the board as worries about sovereign debt problems in Europe and the United States prompted investors to unwind carry trades.

Standard & Poor's threatened on Monday to downgrade the United States' prized AAA credit rating unless the Obama administration and Congress find a way to slash the yawning federal budget deficit within two years.

S&P slapped a negative outlook on the country's top-notch credit rating and said there's at least a one-in-three chance that it could eventually cut it.

The Dow Jones Industrial Average <.DJI> fell 1.1 percent to 12201.59.

Japan's Nikkei <.N225> stock average fell as much as 1.5 percent after the S&P cut before closing down 1.2 percent at 9,441.03.

Hong Kong's Hang Seng <.HSI> also shed 1.5 percent, then climbed a bit to be off 1.2 percent. Foreign investors trimmed holdings they put on in the past few weeks.

Outside Japan, MSCI's index of Asia-Pacific stocks <.MIAPJ0000PUS> slipped further away from a nearly three-year high hit last week. It was down 1.1 percent dragged down by falls in energy and materials.

The S&P outlook cut is likely to shift more capital away from the U.S. and other developed markets toward emerging markets because in relative terms, emerging markets will look safer, more attractive, and investors will no longer look at the US with the same kind of confidence they did in the past, Dariusz Kowalczyk of CACIB.

He added that S&P announcement would be supportive for the currencies and asset prices throughout the emerging world.

Despite the threat of a S&P ratings cut, U.S. Treasuries were mostly steady as other concerns, such as falling stock prices, appeared to trump the outlook revision.

After an earlier sell-off, the 30-year bond was 10/32 higher in price and yielding 4.45 percent, down from 4.47 percent late Friday.

The gap between two-year note yields and 30-year bond yields briefly hit a recent high of 384 basis points, or the largest spread since March 17, but it was last at 379 basis points, up from 377 basis points late on Friday.

Traders and analysts said the S&P threat would likely have little lasting impact, and even the euro's slide on worries about Greece seemed more driven by profit-taking after the euro's rise ran out of steam above $1.45 last week.

The euro fell to as low as 116.41 yen -- the lowest since March 30. The dollar also underperformed the yen, falling to a near three-week low around 82.16, before recovering slightly to last stand at 82.59.

The Australian and New Zealand dollars slipped on the U.S. dollar and yen as falling stocks, escalating euro debt woes and a credit warning for U.S. debt sparked a wave of risk aversion.

The Australian dollar slipped to $1.0465, from $1.0510 late in New York and a high of $1.0572 on Monday. It dipped as far as $1.0454 offshore after S&P's warning to Washington.

Spot gold rose as much as nearly 1 percent in early morning trade, before trimming gains to $1,490.95 an ounce at 0559 GMT, up 0.7 percent. In the previous session, gold reached a record high of $1,497.20

ICE Brent crude for June fell 32 cents to $121.29 a barrel by 0315 GMT. U.S. crude was down 40 cents at $106.72 a barrel.

The Reserve Bank of Australia (RBA) painted an upbeat outlook for the local and global economies in minutes of the April policy-setting meeting released on Tuesday.

Japan Fall