* MSCI Asia ex-Japan hits one-month low, Nikkei slips to 7-week low
* Euro near 2-year low versus dollar
* Asian credit a tad weaker
* Investors seek higher returns in credit markets
* European shares likely slip
By Chikako Mogi
TOKYO, July 25 (Reuters) - Asian shares fell and the euro wobbled above multi-year lows against major currencies on Wednesday as soaring borrowing costs deepened worries that Spain might need a bailout, while Greece appeared unlikely to meet conditions of its aid package.
European stocks were seen slipping and U.S. stock futures were down 0.2 percent, indicating a weak start on Wall Street after three consecutive losing sessions for the S&P 500 index . Financial spreadbetters called the main indexes in London, Paris and Frankfurt to open down as much as 0.7 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan slid 1.1 percent to a one-month low before paring some losses to stand down 0.8 percent.
Worries about the euro zone crisis hurting corporate earnings worldwide sent Korean shares down to their 2012 lows while resource-reliant Australian shares fell on prospects of weakening demand for commodities.
Japan's Nikkei fell 1.6 percent to a seven-week low.
Grains extended their losses on Wednesday, as traders took profits from last week's record highs on improved weather forecasts, which gave some relief to the U.S. crops' outlook.
Copper hit a one-month low and U.S. crude eased 0.3 percent to $88.25 a barrel and Brent shed 0.3 percent to $103.12.
"Generally speaking the outlook for commodities is linked to the outlook for Europe, and the outlook for Europe hasn't got much better for quite some months," said Richard Murrow, the director of E.L. & C. Stockbroking.
Risks of Spain requiring huge financial assistance for its indebted regions, as well as banks saddled with bad loans, fanned concerns of contagion spreading to other fiscally challenged countries, sending Italy's benchmark stock index down on Tuesday to its lowest level since the euro's launch.
The euro was at $1.2072, near a 25-month low of $1.2042 hit on Tuesday, and at 94.37 yen, just a tad above 94.12 yen touched on Tuesday, its lowest since November 2000.
The euro remained pressured due to reinforced uncertainty over Greece, as it held meetings with global lenders to assess the terms of financial assistance needed to keep it afloat and retain its euro zone membership.
Twice bailed-out Greece would be found to need further debt restructuring, three EU officials said on Tuesday, while an ally of German Chancellor Angela Merkel's party said he thought a second round of debt forgiveness was a potential option should Athens be unable to fulfil terms of its bailout package.
As concerns over a fully-fledged Spanish bailout mount, finance ministers from France and Spain were set to meet in Paris on Wednesday after Madrid said Italy and France backed its call for the EU policymakers to swiftly implement rescue steps.
Bids for safety drove 10-year Treasury yields to a record low 1.3824 percent in Asia early on Wednesday and two-year Japanese government bond yield to a seven-year low. Risk aversion pinned the 10-year Spanish government bond yield < near its euro-era high of 7.6 percent.
Spain paid the second highest yield on short-term debt since the birth of the euro at an auction of three- and six-month bills on Tuesday, indicating difficulties in future debt sales.
Spain's five-year bond yield rose above 10-year yields and short-term yields rose above longer-term yields, stoking fears of an approaching credit event. Greece and Portugal saw an inversion of yield curves before they sought international help for their debt crisis.
"With so much risk to go around, markets have been making sharper and sharper distinctions between 'safe haven' and 'risky' assets," said Michael Gavin, head of global macro and emerging market strategy at Barclays Capital in a report.
Kenneth Akintewe, Singapore-based portfolio manager at Aberdeen Asset Management, who helps manage Asian fixed income, also said investors were looking for higher yield and riskier fixed income assets classes in Asia to reduce their risks elsewhere.
"If they are allocating to Asia, the risk of default in this region, given the quality of fiscal management, is considerably less than a number of bond markets in the developed world," he said.
"On a risk return basis, it seems like an obvious choice to reallocate capital to not just Asia but broader emerging markets," he said, but added that such an option was also not risk-free given a slight lack of liquidity in the market as well as currency risks.
Asian credit markets were sluggish, widening the spread on the iTraxx Asia ex-Japan investment-grade index by 4 basis points. The spread has been resilient against deeper losses in other riskier assets over the past month, staying in a 160-173 bps range and below the widest of the year at 210 bps. (Additional reporting by Thuy Ong in Sydney; Editing by Alex Richardson)