* Euro drops to lowest level in 14-months, stocks down
* Investors fear domino effect in euro zone debt crisis
* Gold hits record high in euros
* Dollar, yen strong on safe-haven buying
(Repeats to more subscribers)
By Miral Fahmy
SINGAPORE, May 6 (Reuters) - The euro sank to its lowest
level in over a year and stocks tumbled on Thursday as Greece's
economic woes cast a pall over global markets and fuelled fears
of a sweeping sovereign debt crisis in the euro zone.
Gold hit a record euro high at 918.74 euros an ounce
<XAUEUR=R> and the yen <JPY=> strengthened, both benefitting
from safe-haven buying from investors rattled by warnings from
European leaders that the problems facing Greece could spread
across borders. []
The euro <EUR=> fell below $1.28 in Asia, its lowest level
since March of last year, and down over 10 percent since the
start of the year.
Japan's Nikkei average <> fell more than 3 percent to
its lowest level in nearly two months as the market caught up
with the global selloff following a three-day holiday this
week.
"The focus stays on the euro as the contagion trade
persists," said JP Morgan in a morning note. "Today's ECB
meeting has grown immensely in importance as the redeployment
of some form of credit crisis tools seems increasingly
possible."
The European Central Bank holds its monthly meeting later
on Thursday and, while it is expected to keep rates unchanged
at 1 percent, it is likely to try to assure markets that it can
prevent the Greek debt crisis spreading. []
The cost of insuring Greek, Spanish and Portuguese debt
against default has been rising. Moody's placed Portugal's
credit rating on a three-month review, pointing to a downgrade
and pushing the cost of insuring against the country's default
risk to a record high.
Asian shares outside Japan fell on Thursday, following Wall
Street and Europe, with the MSCI index dropping over 1 percent
<.MIAPJ0000PUS>.
Australian shares <> fell 1.3 percent and Seoul's
composite KOSPI stock index <> opened more than 2 percent
down. Shanghai and Hong Kong stocks were lower.
U.S. stocks fell between 0.6 and 0.7 percent, finding
little support from a private-sector report showing gains in
the U.S. labour market for the first time since January 2008.
[]
The U.S. government's comprehensive labour market report
for April is released on Friday. []
Investors are worried that Greece will not be able to carry
out the austerity measures it pledged to gain a record 110
billion euro IMF/EU aid package.
Violent protests on Wednesday in Athens against the budget
cuts intensified their fears. []
Athens vowed it would not retreat from its measures
whatever the political price, but investors, so far, remain
unconvinced.
"The focus right now is primarily on how this is going to
play out in Europe, how much damage is going to be done," said
Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co.
"How this gets resolved will tell the rest of the euro
countries that are under pressure, 'Here are the parameters for
help.'"
The euro's weakness helped the dollar index hold impressive
gains this week. The index <.DXY> was at 84.11, not far from a
one-year high of 84.31 hit earlier in the session.
The euro fell sharply against the yen on Wednesday but was
relatively steady against the currency on Thursday at 120.55
yen.
Policymakers, including the European Central Bank's Axel
Weber, and International Monetary Fund chief Dominique
Strauss-Kahn warned of the dangers of contagion in other
high-debt euro zone nations. []
German Chancellor Angela Merkel put the crisis in more
stark terms.
"We're at a fork in the road," Merkel told German
lawmakers. "This is about nothing less than the future of
Europe, and with it the future of Germany in Europe."
[]
(Editing by Neil Fullick)
